Speedier resolution of debt disputes?

An estimated 47% of credit-active South Africans are in arrears with their repayments and the huge backlogs in the country’s courts are delaying the legal processes and preventing judgements against credit defaulters from being granted.  

A new set of voluntary measures between debt counsellors and banks have been unveiled that will streamline the debt review process and determine a debt repayment package through mediation between the consumers and their creditors.  

The proposed measures include greater transparency between credit providers and debt counsellors along with revised repayment terms for over-indebted creditors. 

The National Credit Act came into effect three years ago and it was aimed at streamlining the legal processes through a debt-counselling programme and preventing over-indebted people from taking on new debts until the previous contracts had been settled.

Now a task team, appointed by the National Credit Regulator a year ago, has come up with a set of proposals aimed at more rapidly resolving credit disputes that face people who have chosen to enter the debt counselling process.  

Paul Slot, spokesperson for debt counsellors in South Africa says the challenge is to get more distressed consumers into the debt counselling process in order to alleviate their plight.

Slot says that at least nine million consumers are in arrears with their accounts in South Africa and yet only 220 000 people have applied for debt counselling.

“The challenge is to get more debt-stressed people into the system,” he says.

The National Debt Mediation Association says it has expanded its capacity to deal with debt counselling dispute mediation in an effort to more speedily resolve disputes and work out a repayment plan for debt-stressed consumers.

Slot says that the Mediation Association hopes that the establishment of this association will mean that disputes can more rapidly be resolved on a consensual basis so that the backlog in disputes is cleared.There are currently 24 000 credit-related cases on court rolls throughout the country and Slot says that this number is certain to increase as more and more consumers find that they are unable to meet their financial commitments. 

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The affordable sector is the lynchpin of the residential property market in the aftermath of the recession and this is unlikely to change in the near- to medium-term.

It is in this vein that First National Bank (FNB) has set a target of financing 100,000 homes in the affordable sector by 2012.

FNB has financed more than 76,000 affordable housing units since the establishment of its affordable housing finance business unit in 2002. The bank aims to finance more than 10,000 housing units by end June 2011 and an additional 15,000 by end June 2012.

Despite the economic downturn and a tough recession, FNB Housing Finance managed to grow its profit from end user finance in this market by 84% in the 2009/2010 financial year.

“The bottom line is that we focused on the quality of the loans granted than on the quantity. This enabled us to endure the hardships of the recession and limit our defaults within acceptable levels,” says Marius Marais, CEO of FNB Housing Finance.

Despite huge demand for housing in South Africa there is still an undersupply in the affordable housing market space (currently defined as houses in the R180k to R500k price range).

FNB Housing Finance has been working with government and other stakeholders to come up with solutions to address the housing backlog and increase housing delivery.

“We support government’s drive of developing an integrated human settlement. To us it is more than providing end-user finance to our customers, it is also about enabling and creating sustainable communities through the provision of quality affordable housing and to achieve this it is crucial for all stakeholders to work closely together and share best practises for the benefit of our country,” says Marais.

“As we move out of a recession, and stability returns to the property market, we see tremendous opportunities,” adds Marais.

“The rapid growth of our cities, and the increasing demand for affordable shelter, means an ongoing demand for affordable housing. We intend to hold onto our position as a major player in that space, and to ensure responsible consumers have access to the best possible housing finance solution,” he concludes.

Price growth in the affordable category has also proven that there is great scope for finance and supply in this market, although the growth in this category has also fallen victim to the decelerating trend. According to Absa’s House Price Index for August the value of small houses (80-140sqm) increased by a nominal 28,3% y/y in August, slightly down from a revised 28,7% y/y in July. In real terms, the value of a small house was up by 24,1% y/y in July, after rising by 23% y/y in June.

This is still far above the average nominal value of small, medium and large houses, which increased by a weighted 7,1% in August, down from a revised growth rate of 9,4% y/y in July.

Jacques du Toit, property strategist at Absa, told Property24 that affordability has remained one of the key factors in the property market, even with interest rates at their lowest level in three decades, and it has all to do with the financial position of the consumer.

“The household sector is still struggling with high levels of debt, with data released by the National Credit Regulator for the first quarter (Q1) of the year showing that many consumers are still battling with debt. Some further job losses in the first half of the year did not really help consumers to recover financially while consumer confidence has increased in early 2010, but has since remained unchanged up to the third quarter (3Q) this year. Some relatively strong house price growth in the 1st half of the year, together with rising property rates and taxes, continued to keep the focus on affordability.

“We are of the opinion that affordability will remain an important issue in the housing market in future.”

He says demand for more affordable properties in each segment will be noticeable, with resultant influences on price trends.

Pam Golding Properties’ MD for the Western Cape metro region, Laurie Wener, says amid tough economic times and ongoing difficulty in obtaining mortgage finance, the importance of affordability in the housing market remains paramount. “Accessible pricing remains a major obstacle to many new entrants to the housing market, and is a crucial factor for many other types of buyers, including those downscaling for retirement or wishing to upgrade to meet the needs of a growing family.” – Eugene Brink

CONTACT US

Speak to a home loan consultant about financing your new property or reviewing your existing . We are able to assist in lowering your bond repayments and securing attorney discounts.

Complete this short form online
Call us on 011.327.4489
Email: morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za