SA Affordable Housing May - June 2020 // ISSUE: 82 | Page 33

FINANCE MATTERS
the bank, the debtor is then responsible for repaying the amount
owed to the bank. However, if the amount raised at the auction
is more than the amount owing to the bank, the portion of the
purchase price remaining will be paid out to the debtor.
Homeowners that are faced with the prospect of a SIE can
take a number of steps and actions to react to or prevent a SIE,
some of which can only be taken only if the bank has not yet
begun the SIE process while others can be taken at any time. As
a mortgagee facing the possibility of your home being sold in a
sale in execution, you can:
• make use of alternative dispute resolution (mediation,
negotiation, arbitration)
• contact your bondholder to make arrangements to
reinstate your loan agreement
• get legal assistance (if you cannot afford a lawyer, there are
a number of places you could approach for assistance such
as Legal Aid SA, legal non-profit-organisations, consider
approaching a reputable lawyer/law company to assist pro
bono (for free) or a university law clinic)
• respond to the bank’s case in court
• closely monitor the SIE process if your bondholder has
already instituted legal proceedings
• if you have a dispute/complaint regarding how the
bondholder has carried or is carrying out the SIE, you
can apply to the National Consumer Tribunal to get your
complaint heard or lay a complaint with a Consumer Court
or the Ombud for Financial Service Providers
• apply for debt counselling by applying to a debt counsellor
to have you declared over-indebted or by approaching
the Magistrates Court directly (this is possibly one of the
most important steps/measures a defaulting mortgagee
can take, if you decide to make use of a debt counsellor
it is important to make sure that the debt counsellor is
registered with the National Credit Regulator, you can
contact the Debt Counsellors Association of South Africa).
It is also important to know that you cannot apply for debt
counselling if a bondholder has already approached a
court to institute legal proceedings against you
No one wins in a SIE because often when a property goes into a
SIE it is usually sold for less than the outstanding loan balance
(this is the amount the debtor owes on their bond). A SIE is not
something that happens over a few days or even a few weeks
it happens over several months and after many requests by the
bondholder to the debtor to make good on the terms of their
home loan agreement. In addition to this, debtors are usually
not aware that they are liable for the payment of any shortfall
and legal costs that may be incurred as a result of the SIE. This
includes the costs associated with selling the repossessed
property, legal fees and the difference between what the
property sells for at the public action and what the debtor still
owes on the bond. Hence a SIE is the bank’s last resort and is
a painstaking process that is only put into effect after all other
avenues to assist a defaulting mortgagee have been exhausted.
Here are some of the measures that are taken by banks to
assist defaulting mortgagees and are some of the alternatives
that may be initiated by a bank to preclude, where possible, a
SIE process, these include:
• Payment arrangement between the bank and customer(s)
• Rescheduling of the home loan/housing finance
agreement
• Restructuring of agreement
• Option to enter into a private sale agreement in the open
market
• Bank assisted sale
• Debt Review
"It is imperative that a court
makes sure that the sale of the
property will be proportional to
the bank’s interest in recovering
the debt."
A SIE may be cancelled if any of the
following events occur (1) the defaulting
mortgagee pays the full outstanding
arrears on their home loan account. (2) The
mortgagee makes an arrangement with
the bondholder. (3) Defaulting mortgagee
has a private sale and with the proceeds
of the sale settles the outstanding amount
on their home loan account. (4) Special
arrangements are made by the bondholder
or other party to assist the distressed
debtor. Banks are required by law to act
as responsible lenders and in so doing,
a bank may elect to rehabilitate and
remediate defaulting mortgagees, but the
unintended consequence of a SIE can lead
to: (a) low recovery rates that disadvantage
both the customer and the bank. (b) In
some instances, banks may have to buy
into properties known as Properties in
Possession (PIPS). (c) Increased cost of
credit lending, which goes against the
objectives of the National Credit Act (NCA).
www.saaffordablehousing.co.za MAY - JUNE 2020 31