What You Should Know About Use of Retirement Savings for Residential Mortgage (III)

In this concluding part of our presentations on the recently issued Guidelines on Accessing Retirement Savings Account (RSA) Balance towards Payment of Equity Contribution for Residential Mortgage by Retirement Savings Account (RSA) Holders, we will focus on the steps for the termination of an application and refund of equity contribution, the responsibilities of Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs) and how they may be liable for administrative sanctions for flouting the provisions of the Guidelines.

Termination of application and refund of equity contribution

Issues such as foreclosure, death of an RSA holder or even unavailability of the proposed property may lead to the termination or variation of the application process. In the event of foreclosure of the mortgage property, the application is stopped while the Mortgage Lender is required to notify the Commission. In addition, in the case of the death of an RSA holder before the execution of the “Deed of Assignment”, the application is terminated. However, if the deceased RSA holder is part of a joint application, the surviving partner has the option of proceeding with the mortgage where cash flow is considered adequate; terminate the application where cash flow is considered inadequate or choose to downscale the property to a smaller property that will accommodate the cash flow of the surviving partner. In the later instance, the applicant will start the application process afresh. Furthermore, where the RSA holder or the Mortgage Lender could not continue with the mortgage for any reason before the mortgage loan is approved and disbursed, the party that decides not to continue shall notify the PFA. Moreover, if the property that has been presented becomes unavailable before the mortgage is approved and disbursed, the Mortgage Lender shall notify the applicant and the PFA immediately after determining the unavailability of the property. It is instructive to note that where the RSA holder or the Mortgage Lender could not continue with the mortgage for any reason before the execution of the “Deed of Assignment”, the Mortgage Lender shall refund the equity contribution to the PFC immediately after such decision has been made.

Responsibilities of PFAs and PFCs

The Guidelines clearly defined the roles of PFAs and PFCs in the implementation of the retirement savings for equity contribution for residential mortgage. Primarily, PFAs are obligated to ensure that all applications for equity contribution by RSA holders meet the requirement of the Guidelines. PFAs are also mandated to maintain a Record of Applications received from RSA holders for payment of equity contribution for residential mortgage. Additionally, for transparency and ease of supervision, PFAs and PFCs are required to make periodic reports and returns to the Commission on payments made in respect of equity contribution for residential mortgage. The returns stipulated by the Guidelines include monthly and annual returns on rejected applications as well as monthly and annual returns on equity contribution refunded by the Mortgage Lender with reasons. Finally, the Commission and the PFAs and PFCs are expected to reconcile their records in respect of applications on equity contribution for residential mortgage and approvals granted monthly.

Administrative sanctions

The Guidelines provide that pension operators shall be liable for administrative sanctions (monetary/non-monetary) as may be determined by the Commission from time to time for infractions and violations of the provisions of the Guidelines. It is noteworthy that the Commission has been empowered to apply sanctions in a situation where a pension operator fails or delays printing RSA statement for an RSA holder for the purpose of equity contributions for residential mortgage. Also, it is a punishable infraction for a PFA not to process an RSA holder’s request and forward same to the Commission within a stipulated time frame. In addition, there are sanctions for a PFA that fails or delays to give its PFC instruction to remit the approved value for equity contribution to the applicant’s account opened with the Mortgage Lender upon receipt of approval from the Commission. Furthermore, the Commission may also sanction a pension operator for failing or delaying to render returns to the Commission on payments made in respect of equity contribution for residential mortgage approvals on monthly and annual basis. It is instructive to point out that negligence by PFA and PFC in the approval process that leads to fraud and or loss to the RSA holder is a serious infraction that attracts administrative sanctions.

This piece concludes our presentations on the highlights of the Guidelines on Accessing Retirement Savings Account (RSA) Balance towards Payment of Equity Contribution for Residential Mortgage by RSA Holders. Part I highlighted eligibility for participation, the maximum amount to be applied as equity contribution for residential mortgage and the general ground rules for the implementation of the pension for mortgage policy. Part II focused on the application and documentation process and remittance of the equity contribution while the Part III dwelt on Administrative Sanctions for violations by PFAs and other salient provisions. In the meantime, the Commission has invited interested RSA holders to contact their PFAs for more information and guidance.