Cape Town - Human Settlements officials met with banks to raise their concerns over how financial institutions carry out repossessions to recover outstanding balances of less than R100 000 on defaulted mortgage loans by low- and middle-income earners.
Minister of Human Settlements Mmamoloko Kubayi revealed information about the meetings after concerns were expressed by the EFF in Parliament over the number of home repossessions that would be triggered by the constant increases in the prime lending rates by the SA Reserve Bank.
The meetings came as a R60 billion class action lawsuit in the Gauteng High Court recently exposed a R1.3 million property was sold at an auction for R1 000.
Kubayi, who doubles as the ANC’s economic transformation chief, told MPs her department was fighting during “periodical” meetings with banks for government concerns to be heard over the nature of foreclosures and repossessions in general.
However, she said last year’s increases in interest rates would not lead to immediate mass home repossessions as it can take up to 39 months for a property to be auctioned.
EFF MP Mgcini Tshwaku asked Kubayi whether Human Settlements had been tallying up the number of household owners whose homes were repossessed owing to the rising interest rates, and the measures Kubayi had put in place to help those who could no longer afford to buy and maintain houses even though their incomes exceeded the threshold for subsidised government housing.
Kubayi said: “The National Department of Human Settlements has already sensitised the Banking Association of South Africa (Basa) about its concerns over the nature of foreclosures and repossessions in general during its periodical meetings with the Basa.”
Kubayi said this came in the context of financial institutions repossessing homes only to recover an outstanding loan balance of less than R100 000 on a defaulted mortgage loan.
Kubayi said: “To this end, we are crafting an intervention strategy which is premised on the basis of risk sharing measures between government and Basa to address this fundamental concern.
“Our interventions are not attributable to cyclical fluctuations in interest rates, but to financially distressed households within the low- and middle-income (homes).”
She said the prime lending rate upticks last year had had “relatively no effect with respect to foreclosures and repossessions” due to the time lag the market took to factor in interest rate increases, and the time before a property was repossessed and resold (or a public auction of the property).
Kubayi said banks were granted sales in execution orders on 3 600 mortgages that were in default in 2020, which is when the pandemic struck.
“Of these, only 672 were sold, which represented 0.04% of the 1.7 million mortgage accounts held by the banking sector,” she said.
“Furthermore, on average in 2020, 81% of sales in execution were cancelled due to banks assisting their customers or the client reinstating the credit agreement.
“While in 2019, a total of 3 136 accounts of the 1.7 million mortgage contracts ended up in regulatory sales in execution and only 960 were sold.”
Attempts to solicit responses from the SA Reserve Bank drew a blank, while an official at Basa said they could only take interviews from today.
Kubayi said mortgage data analytics from the Office of Disclosure, supplied to them by banks, show that the biggest risk factors faced by a “large majority of borrowers and homeowners” include high levels of indebtedness, impaired credit records, affordability, and a lack of collateral security.
She said the department’s Consumer and Borrower Education Policy Programme aims to educate borrowers and would-be homeowners about the real estate market transactions and, ongoing costs of owning a home, and the importance of property maintenance to avoid it losing its value.
soyiso.maliti@inl.co.za