Where to begin… As I scanned my favourite online news sources for ‘story’ ideas this week I was presented with countless possibilities. Should I talk about the ANC Youth League President’s ‘Hate Speech’ trial, the ongoing Sharemax debacle as recounted by
The article that caught my eye was penned by Andile Ntingi and Nhlanhla Ncaca and first appeared in City Press, before showing up online at Fin24.co.za. The article begins: “South African banks could find themselves engaged in drawn-out legal battles with cash-strapped home owners following a landmark Constitutional Court judgment that may saddle lenders with more administrative red tape before they can sell the homes of defaulters.” Sounds complicated! But all the ruling means is banks will no longer be able to rely on ‘rubber stamped’ execution orders from High Court registrars before disposing of properties – they will have to obtain such order from a Judge or magistrate!
Banks have themselves to blame
Banks probably have themselves to blame for the latest development. The press has been full of stories of aggressive and often ‘unfair’ repossession processes – including properties being sold for fractions of their market values to recover debt. The Constitutional Court ruling was the culmination of an ongoing court struggle between Elsie Gundwana (a resident of the Western Cape) and Nedbank. The bank had sold her house to collect less than R5 300 in arrears, way back in 2007. Gundwana has since been resisting an eviction order from the new owner of the property.
The ruling confirms South Africa’s ongoing push toward consumer protections as introduced through the FAIS Act (financial services) and Consumer Protection Act among others. The National Consumer Forum (NCF) welcomed the judgement. “The ruling will protect the rights of low-income earners and it will now be difficult for anyone to take away their property. For a long time the system exploited consumers because they did not receive fair and proper justice. This is justice for them,” commented Thami Bolani, chairperson of the NCF.
Will this additional ‘hurdle’ in the home repossession process ease the burden of debt-laden homeowners? It will certainly make it more difficult for banks to follow ‘by the book’ repossession processes – especially given the number of stressed borrowers. The latest National Credit Regulator report suggests there are 198 000 creditor accounts in arrears more than 30 days… These consumers owe banks approximately R107 billion! And banks say approximately 14.4% of their combined R760 billion home loan order books are in arrears...
Banks not too fussed by the ruling
Although the ruling offers some protection for struggling homeowners it does little to address the ‘David versus Goliath’ battle that typically plays out when a mortgage holder defaults. The banks have more than enough clout – financially and resource-wise – to jump through whatever additional hoops the law requires to get what’s ‘rightfully’ theirs!
A couple of bank representatives offered their views in the City Press article. Marthinus van Rensburg, head of Absa Bank’s legal department, noted: “The judgment may have a procedural impact in that all these cases will now require direct oversight by a judge, thereby adding to their case load. This, in turn, may result in a delay in these and other cases being heard.” The affected mortgage holder will bear the brunt of any delays as interest and other administrative costs pile up!
Funeka Ntombela, director of home loans at Standard Bank, echoed Van Rensburg’s sentiment: “The bank anticipates that the judicial process will now take longer…” Her advice to struggling mortgage holders… “Consumers need to approach the banks as soon as they struggle with bond repayments. Standard bank, like other banks, offers a distress sales programme (Easy Sell), where we help sell properties on behalf of indebted consumers.”
Some rights are dearer than others
Recent legislative interventions have created situations where the defaulting homeowner or tenant rights are enforced over the rights of the property owner! Without focusing on the human element in individual cases the banks have extended funding to consumers – hopefully after complying with the required checks and balances – with the property as ‘last resort’ surety for the loan. In the event the homeowner defaults on the monthly mortgage payment the bank is entitled to repossess and sell the property to make good. Common business sense demands the bank acts as quickly as possible in this regard, because delays can be very costly to both parties...
But owners of ‘buy to let’ properties have it much harder. They don’t have the same resources to deal with difficult tenants, who nowadays enjoy virtually unlimited rights to squat in rented premises without honouring their rental agreements. The law offers very little protection for the property investor that doesn’t have the financial means to evict a defaulting tenant!
Editor’s thoughts: I’m the first to condemn South Africa’s banks for their often greed-based decisions – especially when the rights of struggling consumers are infringed upon. At the same time I cannot understand a system that rewards defaulters to the detriment of law abiding citizens, be they private individuals or corporations. Have you got any repossession horror stories to share? Add your comment below, or send it to gareth@fanews.co.za
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Added by Dikaledi, 11 Aug 2011