It’s not much discussed, but mortgage fraud is becoming more extensive and could well be adding to the banks’ current extremely cautious approach to lending.

There are 101 varieties of mortgage fraud and the real scale of the problem is only just becoming to emerge, but in most cases the lender is definitely at risk in these schemes. If you add this worry to the restrictions of the National Credit Act, it’s really no wonder that the banks are much more wary about lending than they were previously.

At a national mortgage fraud seminar held late last year, Absa Home Loans Operations GM Pieter Vorster told delegates that an estimated R300m worth of fraudulent home loan applications had been blocked by the banks. And Greg Salter, the Nedbank Home Loans GM for Special Projects, Risk and Compliance, noted that mortgage fraud was increasingly being perpetrated by international crime syndicates using advanced technology.

Indeed the FBI recently noted that mortgage fraud is increasingly being favoured by criminals who see it as a low-risk activity generating relatively high returns.

However, the most common form of mortgage fraud is still income inflation by individuals, that is, the falsification of income and debt information and documentation to help applicants obtain home loans, or perhaps bigger loans than they would otherwise have been granted. This immediately exposes the lender to the risk of non-payment, since the borrower may not really be able to afford the monthly instalments, especially if interest rates rise.

And it is of course absolutely illegal so anyone who advises the would-be borrower to provide any false information in loan documentation is also putting that borrower at risk.

Potential buyers should never to be cajoled into making false statements on loan applications, including overstating your income, understating your debt, or lying about the source of your deposit or the nature and length of time of your employment. And if the person helping you make an application insists that ‘everyone else does this’ or that it is ‘quite legal’, ask them to put that in writing. You can be sure it won’t happen!

CONTACT US

Speak to a home loan consultant about financing your new property or reviewing your existing mortgage. 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

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Mortgage guarantee fund ‘liberates’ buyers

Developers should be jumping for joy at the prospect of thousands of new home buyers recently “liberated” by the introduction of a state mortgage guarantee fund, says RealNet chief executive Tjaart van der Walt.

“The fund is specifically intended to give the banks more confidence about granting home loans to people earning R3 500 to R9 000 a month – and there are thousands of salary-earners, such as police, teachers and nurses in this bracket who were previously shut out of the market.

“However, there is a limited amount of stock available that would be affordable for such buyers and that should spur developers into action. At current interest rates, people earning R3 500 a month, for example, could probably only afford bonds of around R108 000. Assuming they pay a 10 percent deposit, that would mean they could possibly buy properties costing around R118 000.”

At the upper end of this scale, people earning R9 000 a month might be able to buy homes costing around R310 000, and a couple who pools their mid-range salaries for a total of R15 000 a month, say, could probably buy a R500 000 home, depending on what other debts they have, such as car repayments or HP instalments.

“It is important to note,” says Van der Walt, “that the introduction of the mortgage guarantee fund does not override the provisions of the National Credit Act, and that banks are still going to apply the strict credit qualification criteria stipulated in this legislation, no matter what income bracket potential buyers fall into.

“Nevertheless, we believe there will shortly be much more action in the inner city and township markets, which will stimulate new development initiatives in other areas. This will help create jobs and, in turn, even more potential home buyers.”

Meanwhile, he says, all potential buyers should be doing their utmost to save the biggest deposits possible. This is not so that they can afford more expensive homes, but so they can keep their bond repayments down and give themselves some budget leeway if interest rates should start to rise again.

“We also believe government could be doing even more to encourage home ownership, for example introducing tax-relief on bond repayments as is available in the US.”

By choosing Mortgage Plus for a loan, you will get that continual service to make sure you are getting the best deal possible.

CONTACT US

Speak to a home loan consultant about financing your new property or reviewing your existing mortgage. 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