Sunday, February 15, 2009

Are the banks evil, or what?

Some 1,200 South Africans are losing their homes under the hammer every month because they can no longer afford monthly mortgage repayments.

Latest figures from auctioneers Alliance Group show that forced property sales have increased more than eight-fold over the past year. Alliance Group CE Rael Levitt says the group placed around 1,200 distressed properties for sale on its auction floors in November, December and January, compared to less than 150 per month a year earlier.

Meanwhile, latest data from ABSA shows that the number of home loan customers defaulting on monthly mortgage repayments rose nearly 65% in 2008. ABSA Home Loans managing executive Luthando Vutula says the percentage of Absa clients in mortgage arrears has increased from 5,35% in December 2007 to 8,79% in December 2008. Bank foreclosures or repossessions by ABSA increased more than threefold last year, from 149 in 2007 to 462 in 2008. – Source Joan Muller.

I have a house on the South Coast, KwaZ
ulu/Natal, which I’ve been battling to sell for more than a year now. The outstanding bond with ABSA is about R240.000.

Estate Agents had the property on the market for a selling price of R920.000, which they believed to be a fair market value. The price dropped every odd month until it reached a low R600.000. When the buyers started placing offers the New Credit Act hampered every sale opportunity. The countless phone calls I received from agents who wanted to show potential buyers the house, became such a daily annoyance that I eventually withdrew the property from the market.

Recently, I decided to sell the house to my son who has been working and living in the UK for the past 3 years. We agreed on a low selling price of R400.000 – a win-win situation for all of us. The current tenants could stay on while the rental fees covered the monthly bond payment. My son would have made his first sound investment on an asset that was worth double the purchase price. All the relevant documents were submitted to a Bond Consultant, who didn’t foresee any problems with acquiring a 100% loan. The current rental agreement was also submitted as part-and-parcel of the application, --- and just when we were all getting excited, feedback from the banks came rolling in. Every single bank declined the application on reasons of “affordability”.

The Bond Consultant was sure that there had to be an error somewhere in the system, and the application was resubmitted to all the major banks. On round No.2 ABSA bank finally approved R311.500 but demanded a cash deposit of R88.500. Now I ask you with tears in my eyes, why are the banks doing this? Where must we suddenly get R88.500 for a deposit? Besides the evidence of my son’s healthy bank balance, secure job, his monthly income in the strong currency of the British Pound, PLUS the guarantee that a rental agreement will be covering the entire bond payments every month, the banks simply refuse to cooperate.

Something is seriously wrong with the banking system!

Can anyone tell me what is going on, because if I don’t get answers soon I’m going to start believing in all the conspiracy theories about 666, the all-seeing evil eye, alien reptiles controlling the banks, and so forth…..?


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