Category: Banks

SA Banks struggling to deal with distressed Property Owners

distressed Property Owners
distressed Property Owners

According to South Africa National Credit Regulator’s latest Consumer Credit Market report, about 75,000 property owners were in arrears on mortgage repayments (for more than three months) in June.

SA’s big banks are taking longer to deal with home loan defaulters even though they are continuing to reduce their nonperforming home loan books from 2009-10 peaks, say industry players.

Standard Bank home loan head Steven Barker said last week that although the bank’s percentage of nonperforming loans fell from 6.2% to 4.9% of total advances in the year to June, the reduction rate has not been as rapid as hoped. He said it could become more difficult to deal with distressed clients who have not yet been worked out of the system.

“We are finding it quite challenging to manage the remainder of our nonperforming loan book as most (cases) are legal matters that have gone the sequestration or repossession route and are taking longer to settle than we had hoped.”

Mr Barker believes it could take at least another two to three years to get rid of SA’s overhang of distressed properties, given the worrying state of consumers’ financial positions.

According to the National Credit Regulator’s latest Consumer Credit Market report, about 75,000 homeowners were in arrears on mortgage repayments (for more than three months) in June. These defaulters’ mortgage debt totalled R41bn, about 5.2% of total home loan advances of R799.41bn. Figures released by the individual banks for their June financial reporting periods confirm a default level of 4%-6%. That is a marked improvement on the 10%plus reported by banks in 2010 but still around double pre-crisis levels.

Standard Bank’s research indicates that sales volumes are about 33% down on 2006-07 levels.

“This could well be the new normal for the South African housing market, something the industry will have to adjust to,” Mr Barker said.

First National Bank (FNB) Home Loans CEO Jan Kleynhans expects the bank’s 21% rate of reduction of nonperforming loans in the 12 months to June to continue for the next year.

He concedes that a slowdown is likely thereafter, as the remainder of loans — mostly debt-counselling and insolvency matters — are likely to take longer to work out of the system due to the legal processes involved.

Mr Kleynhans said that it would probably take 18-24 months for FNB’s nonperforming loan book to return to normalised levels of about 2%-3%. However, he said demand for residential property was unlikely to improve in the near term, given SA’s fairly low economic growth rate and “persistent and relatively high” household debt levels, which were constraining the ability of consumers to take on new mortgage debt.

Property economists are equally bearish about house price growth. Absa senior housing analyst Jacques du Toit and FNB property strategist John Loos said they expected a slowdown in growth in the next 12 months. Absa recorded an 8.5% rise in house prices in September year on year, down from about 11% in the first half of this year.

Mr du Toit expected house prices to rise by an average 9% for the year, slowing to 6% next year.

Mr Loos expected house prices to achieve an average 6.5% growth this year and 5.7% next year, down from 7.3% last year.

ANZ Bank 'bullies customers'

A whistle-blowing ANZ Bank employee has accused the bank of bullying struggling home loan customers to help achieve record profit.

One of UK's biggest mortgage lenders fined £10m for overcharging customers

mortgage lenders  overcharging customers
mortgage lenders overcharging customers

One of Britain’s biggest mortgage lenders has been handed a record £10.5 million in fines after exploiting more than 46,000 desperate homeowners.

GMAC, part of giant American firm General Motors, was found guilty of overcharging struggling customers when they missed mortgage payments, paid off their loans or had their accounts passed on to solicitors.

It also failed to take in to consideration the budgets of borrowers with debts and of starting repossession proceedings when it was not the last resort. Many of the homeowners were left worse off as a result.

GMAC was slapped with a £2.8 million fine and ordered to pay back £7.7 million plus interest to customers by the City watchdog Financial Services Authority.

Margaret Cole, director of enforcement and financial crime for the FSA, said: ‘This case sets a precedent and illustrates our determination to deliver fast outcomes for consumers.

‘It is an excellent example of what the FSA’s more intrusive approach can achieve for consumers, and we hope it will deter other firms from not treating customers fairly.’

During the housing boom GMAC was one of the 10 biggest mortgage companies in the UK, lending more than £12 billion a year to a mixture of nearly 200,000 ordinary homeowners, landlords and those who had already struggled with debts previously.

It was hit hard by the credit crunch, and stopped lending new home loans in May 2008.

The FSA investigation found that between 2004 and 2008 GMAC was charging borrowers who failed to meet a mortgage repayment £15 for missed direct debits. They also charged too much for referring a case to solicitors.

Margaret Cole hopes the decision will help deter other firms from treating the customers unfairly

The FSA’s Margaret Cole hopes the decision will help deter other firms from treating the customers unfairly

Those that paid off their mortgages early were charged extra penalties for the money they owed in fees. The FSA ruled that all these charges were excessive and customers should be handed back the excess charges.

The watchdog also discovered that homeowners who failed to meet their mortgage bills were put on to repayment plans that did not take in to account their household budgets, and as a result many were threatened with losing their home. Many of these were never given the option of setting up other repayment plans to save their property.

A third of those customers who had repossession proceedings started against them later lost their homes.

A spokesman for GMAC said: ‘We want to apologise to customers affected. We have worked openly with the FSA to review and revise our procedures for managing accounts in arrears.

‘Whilst our arrears charges were in line with the market, in hindsight, we fully accept that for certain fees our estimates of the costs were not proportionate to the additional administration actually required.

‘We will be writing to customers who incurred these specific charges when in arrears and will re-credit the charges plus interest.’

The FSA is clamping down on mortgage companies who fail to deal with customers fairly.

In August this year trade body the Council of Mortgage Lenders warned members that fees imposed on customers for those in arrears had to reflect the actual costs of any work carried out.

A spokesman for GMAC said: ‘We want to apologise to customers affected. We have worked openly with the FSA to review and revise our procedures for managing accounts in arrears.

‘Whilst our arrears charges were in line with the market, in hindsight, we fully accept that for certain fees our estimates of the costs were not proportionate to the additional administration actually required. We will be writing to customers who incurred these specific charges when in arrears and will re-credit the charges plus interest.’

Figures released by the FSA yesterday showed complaints from homeowners who had missed mortgage repayments had increased by 41 per cent in the first six months of this year compared to the same period last year. Some 39,181 were received between January and June.

And there was a further boost for the housing market as the Bank of England reported the number of home loans for those buying a property hit an 18-month high in September. The number of mortgages approved for purchases rose to 56,215 from the previous month’s figure of 52,970.

Mortgage lending increased by £922 million in September, less than the £1.28 billion in August but above the average for the last six-months.

However, economists warned that until unemployment fell and banks started offering cheaper mortgages for borrowers with small deposits the housing market was likely to slow again.

They can’t bank on payments you haven’t signed for

If paperwork is missing, you could get money back

PAPERWORK. Paper trail. Fine print. Even in today’s increasingly paperless society, the importance of having all your ducks in a row in case of disputes has not changed.

Whether it is a piece of paper, an e-mail or a cellphone photograph of a document, having a backup of contracts, agreements and receipts will always stand you in good stead. Having such documents on hand when an agreement is contested is useful, particularly when the amounts in question are large.

Many of us are guilty of poor record keeping. What I do not understand is a supplier, in this case a bank, keeping sloppy records. It is not a choice for suppliers but an obligation. Without being able to produce an agreement, whether written or recorded verbally, suppliers would battle to get consumers to comply. No proof of agreement, no pay.

That is how Johannesburg teacher Mark de Buys secured a R20000 refund from Standard Bank. And banks are not in the business of giving money back unless they really, really have to.

In this case they reallydid. And that was not because the bank had charged De Buys between R250 and R800 a month for seven years for an insurance policy he claimed he had never signed, but because it had lost the agreement.

To date, Standard Bank has been unable to find the original loan document that De Buys signed, which, it said, would show he had opted for the insurance.

Of more concern, though, is the bank’s attitude. It told De Buys it would refund the debits “pending management authorisation”, but it later reneged, saying De Buys had been sent premium increase notifications, which served as his opportunity to cancel.

De Buys never received the notices; the bank had sent them to the wrong address. When the bank refused him a refund, he complained to the banking ombudsman and to The Power Report.

“How is it possible for a bank to debit an account without the account holder’s permission, fail to produce a signed agreement and then refuse to refund the account holder?” he said.

De Buys, whose son is still paying off the loan, noticed the debits in April after his wife, who ran the family’s accounts, was admitted to hospital and he took over the job.

“Standard’s response is that I should have noticed them taking money from my account years ago.”

I approached Standard Bank for clarity. Before it responded, the ombudsman contacted De Buys to say the bank would reimburse the money.

“Out of the blue, with no explanation or apology, the bank refunded me over R20000. I wonder how many other people are in the same boat?” said De Buys.

Bank spokesman Ross Linstrom said that after De Buys had reported the matter to the ombudsman, Standard had advised that office of the incorrect debit and reversal.

“Standard Bank should have taken the opportunity to apologise to the customer directly. Regrettably this did not happen,” he said.

Why did Standard wait for the ombudsman to contact it before doing the right thing?

“The bank’s decision to effect a refund was not based on any incorrect action, but rather the inability on our part to locate the original documentation confirming his acceptance,” said Linstrom. “The customer was given the benefit of the doubt.”

He said the bank’s original stance was based on the normal premise that he had accepted the offer of the credit life assurance and had condoned the debit on his account for seven years. “Had a claim been submitted, it would have been met by the insurer due to premiums being paid,” he said.

I asked whether the bank was investigating the breach.

“We do not consider this being a breach, but record-keeping is obviously a high priority for the bank,” said Linstrom.

But what if this had happened to other customers with student loans? “This is an isolated case given the information provided.”

De Buys is not impressed.

“What really got me angry about the whole affair was the tone of the bank’s communication. It basically accused me of not managing my finances carefully enough and implying that I was trying [to pull] a fast one.”

If I had a student loan at Standard Bank and did not have a copy of the agreement, I would be on the phone right now requesting it.

It is worth checking all agreements and contracts again, especially those that offer optional add-on products, and ensuring you are paying only for what you signed. Cellphone companies, for instance, charge separately for extras such as caller ID and itemised billing. If these charges are on your monthly bill and you did not request them, take it up with your service provider and ask for a refund.

Shadow bidding in auction

House Auction
House Auction

Read this asap: Shadow bidding in auction

Company Liquidations


There are a number of advantages to liquidating your business.

Liquidation affects the company, not the individuals.

Management of the liquidation is passed to the Liquidator, relieving the directors of some of the stress involved in liquidation.

It removes the threat of director’s personal liability under trading while insolvent.

Unsecured debt is written off, including any tax liabilities

Any legal action against the company is stopped as soon as the company closes.

It has no bearing on the directors and, in most cases you are able to get on with your life as if it had not happened.

If you want to go back into business, then you can.

What are the consequences of liquidation?

All share transfers after commencement of the winding up process are void.

Disposition of any property after commencement of the winding up position is void.

All civil proceedings against the company are suspended from date of the court order until appointment of a final liquidator.

Any attachment by creditors enforced against the company / close corporation after the commencement of winding up is void.

The Directors cease to be in charge of the company. They are however (if it is a hostile liquidation application against the Company), entitled to oppose the granting of the final order after the provisional order has been made.

The property of the company falls under the custody of the Master who then hands it to the Liquidators once they are appointed.

Sections 417 and 418 of the Companies Act come into play. This empowers the Master, the Court or a Commissioner to summons all people who have knowledge of the company’s affairs to appear in a forum which is called an “insolvency enquiry”, where they can be interrogated.

A builder’s lien – where does it rank in insolvency?

What is the legal and practical effect of a builder’s lien over fixed property during the liquidation process?

Section 47 of the Insolvency Act, 24 of 1936, provides that a lien holder who delivers property subject to his or her lien to the trustee of the owner’s insolvent estate, at the trustees request, does not lose the security afforded to him by his right of retention if, when delivering the property, he notifies the trustee in writing of his rights and in due course proves his claim against the estate. (These provisions apply mutatis mutandis to companies and liquidators).

Nature Of lien (or right of retention)

Our law provides that a person has a lien (or right of retention) over the property of another if he (the lien holder) has expended labour or incurred expenses in respect of the property. There are two main categories of lien, namely:

A debtor and creditor lien, which is based upon contract. It extends to all expenditure which the lien holder has incurred upon the property in terms of a contract, express or implied, with another party. The lien holder may retain the property as against the other contracting party (but not against third parties) until he has been compensated for the work done and costs incurred;

An enrichment lien, which is based upon unjustified enrichment, which is again subdivided into:

salvage liens, which is the right of retention over property for expenses necessarily incurred on it, in other words expenses without which the property would either have been destroyed or would have depreciated in value;

improvement liens, which is the right of retention over property for expenses incurred which have enhanced the value of the property. The holder of an enrichment lien may retain the property until compensated for his expenses and labour, but he cannot insist on receiving more than the amount by which the owner of the property has actually been enriched.

A real lien over immovable property ranks in preference over all mortgage bonds passed over the property, even if such mortgage bonds have been passed before the establishment of the lien. The holder of a real lien over immovable property therefore enjoys the strongest possible protection, outranking all other forms of security, including the security afforded to the holder of a statutory instalment sale hypothec, a pledge and a landlord’s hypothec.

Whilst debtor and creditor liens are not forms of real security and thus cannot afford preference against mortgagees, they do, by virtue of Section 95(1) of the Insolvency Act (referred to above) secure the lien holder’s claim vis-à-vis the insolvent debtor’s concurrent creditors (see D. Glaser & Sons (Pty) Ltd v The Master 1979(4) SA 780 (C)). A debtor and creditor lien would therefore rank only after e.g. a landlord’s tacit hypothec.

The difference between secured and preferent creditors is essentially that a secured creditor is one who holds real security for his claim. He is entitled to be paid out of the proceeds of the property which is subject to the security; his preferent right arising from a security interest in specific property. A preferent creditor, on the other hand, does not hold any security for his debt, but, in terms of the Insolvency Act, he is entitled to payment of his claim before concurrent creditors. His preferent right arises from the provisions of the Act.

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