Housing Finance Company Limited (HF) has been revealed to be breaching multiple CBK capital and lending rules.
The bank has been exposed by market watchers to having been engaging in extremely risky lending despite lacking sufficient capital.
Besides lacking sufficient capital, the lender also disbursed loans in specific instances that put its core capital at risk.
According to regulations, a bank must not lend more than 25 percent of its core capital to one borrower or related borrowers in the rule known as single obligor.
Housing Finance’s single obligor ratio stood at 40% as of December.
A bank should not lend over 20% of core capital to a single insider, such as a director or shareholder. Housing Finance’s single insider ratio stood at 66% as of December.
Besides breaking banking rules, Housing finance has been going against covenants it has signed with multiple lenders including Shelter Afrique, East African development bank, and European Investment Bank.
HF has often been lucky despite flouting the rules and breaking covenants by getting waivers.
Talking of breaking covenants, the struggling mortgage financier is currently embroiled in a lethal legal war after shortchanging Former Attorney-General Githu Muigai in a deal worth over Sh100M.
Prof Githu, through his trading company Fairlake Estate, is seeking to terminate the auction deal, arguing that Housing Finance has failed to offer him documents for ownership of the homes.
Through a proxy named Koome Kiragu, Githu bought 16 apartments in Nairobi’s Ngong Road that HF was auctioning in Sh100.5M deal.
In his court papers, Prof Muigai argues that the bank breached the sale contract by failing to furnish him with the transaction’s Completion Notice within 90 days, as provided for in the agreement, to enable him take control of the property.
He wants the court to order a refund of the Sh100.5 million and reversal of the auction.
