Tag: Property Owners

Judges rule for property owners against banks

After three years, the Moores finally own their house. Again! Six years ago, the Vereeniging couple fell prey to a reverse mortgage scam known as the Brusson scheme, named after the unregistered credit provider who managed to dupe about 900 people into handing over ownership of their properties in exchange for a loan. The Moores received notice that the sheriff of the court would attach their property in August 2011, but less than two weeks ago, they knew that their home was safe. This is because the Legal Resources Centre (LRC), which is representing about 100 people affected by the scheme, won a judgment in the high court in Joburg on September 26 to return ownership to the Moores. Although the bank was not party to the scheme, Acting Judge Mohammed Chohan found Absa could not attach the property because the Moores had not intended to transfer ownership of their property to a third property. ‘It was amazing,’ a relieved Christine Moore said. ‘It was a stressful period but we can now breathe again.’

The LRC won a similarly favourable judgment on September 25 in the case of the Radebes, who in 2007 were also caught in the scheme. ‘We’re over the moon, we’re so happy. We thought it would never end,’ the Radebes said. The LRC has been battling with 90 different cases involving Brusson Finance, which was never a registered credit provider and has since gone into liquidation.

Essentially, Brusson would deceive homeowners into signing over ownership of their properties into a third party ‘investor’ to secure loans. ‘Quite clearly, the Brusson scheme was widespread and would seem to have targeted the most vulnerable of people, namely those who were already over-indebted,’ Judge Chohan wrote in his judgment. In a statement issued after the judgments were handed down, the LRC said these two rulings were vital for future similar cases involving the Brusson scheme and banks, which it accused of reckless lending. ‘With such a favourable judgment, the LRC is in a better position to litigate on behalf of the other 90 clients we are currently assisting, some of whom are in various stages of litigation,’ the LRC said.

In the Moore and Radebe cases, Absa and Nedbank, respectively, had provided the loans to the fake investors, although Judge Chohan said there was no doubt there would be other financial institutions that had made loans to the Brusson scheme. The banks argued in the two cases that the homeowners should have known or foreseen of the binding consequences of the contract with Brusson. But the judges in both matters, Judge Chohan and Judge Caroline Nicholls, to different extents, agreed that the homeowners had no intention of selling their properties and were deceived by Brusson. Both judges said the banks were still entitled to pursue claims against the investors.

Judge Nicholls ordered Nedbank to pay the legal costs in the Moore case, while Judge Chohan ordered each party to pay its own legal costs.


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.


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