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In plain sight

09 May 2006 Angelo Coppola

In our second newsletter on the mortgage bond early cancellation fee, we speak to Standard Bank about their approach to the mortgage bond cancellation fee.

According Leon Barnard, director of home loans at Standard Bank a customermay only give written notice oftheir intention to settletheir home loan account once a period of 90 days has lapsedfromthe registration ofthe home loan account.Ifnotice is given prior to this expiry date, the bank is entitled tolevy aninterest costuntil the expiry date.

Whena customerapplies fora bond and agrees on a term forthat bond,thebankmakes a commensurate commitment to it'sfundingprovider for the termspecified by the customer.

By effectively reneging on the initially agreedupon term of the loan, the customer forces thebank to return funds sourced for that particular loan before thespecified time anda cost is incurred by the bank in this regard. The notice interest is thus levied to recover some of these costs.

Furthermore, thebank canalso elect to refund theinterest paid in respect of this notice period tothe customer'sbond accountif the customeracquires a new home loan account with thebank within six months ofthe settlement of theprevious home loan account.

The bankis notlegally obliged to refund this interest collected but the commonpractice is to refund the interest when the customer takes up the new home loan.

TheLetter of Grantthat is provided to the customer hasincluded thenotice interest clause sinceFebruary2003. This clause is not hiddenand wehave specifically placed it in the Letter of Grant to increase its visibility.

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