Are you worried that you may lose your home because of pandemic layoffs and the unstable economy? We look at ways to protect your hard-earned asset and what your legal rights are.
Most people across the globe are experiencing some kind of hardship because of the Covid-19 pandemic. First and foremost a health emergency, the virus requires social distancing, which could alienate people from their communities, often making the home the only sanctuary where families can be together.
But economic distress brought on by lockdown means many people have lost their jobs and are in danger of losing their homes too. What can you do if you are facing such a crisis?
The law is on your side
The law in South Africa says if you don’t pay your home loan instalment for three months or longer, the bank or other loan provider can cancel the agreement, repossess your home, and sell it to recover your outstanding balance.
Fortunately, court rulings in 2018 made it harder for banks to sell repossessed homes on auction at discount prices by determining a reserve price. These rulings have saved many people from homelessness and long-term debt.
A helping hand
Unable to afford your home? Personal finance website JustMoney’s commercial manager Sarah Nicholson says there are immediate solutions. You can rent out your property, restructure your loan over a longer term or consider debt counselling. “Rather than hiding from your creditors,” she says, “approach the bank and discuss your situation.”
If you’ve always been prompt about paying your monthly instalments and have little or no outstanding debt, you have a better chance of keeping your home than if you default often.
However, if you have to sell your home, it’s best to do it sooner rather than later. You’ll get a better price and won’t have to deal with legal proceedings and costs. If you continue not paying your bond or avoiding your bank, they’ll get in touch and propose a specific payment plan or offer debt counselling.
Avoid legal action
The final step before legal proceedings against you start, is the issuing of a section 129 notice in terms of the National Credit Act. It informs you of the outstanding amount and date of your arrears.
“See this as a last chance to prevent your creditors taking legal action,” says Nicholson. “Avoid delays now, you only have 10 days to apply for debt review – this is when a debt counsellor assesses your debt and implements a repayment plan.”
If the section 129 notice is unsuccessful, the bank may summon you to court through the sheriff whereafter the bank will apply to court to auction your home.
A judge will ensure that the correct procedures are followed and also consider whether the property is your main place of residence, and whether you have other ways to settle your debt.
Your bank must prove your property’s market value, what you owe on the bond as well as any outstanding rates and taxes.
If your home is sold, the money will be used to settle your loan and any other costs. The balance will be paid to you. If your house has been sold on auction, you don’t have to move before the property has been transferred to the new owner.
“The current economic climate is worrying for people whose finances have already been under pressure pre-Covid-19,” says Nicholson. “Rather address the ‘elephant in the room’ fast and get help.”
How creditors can help
The bank will do everything possible to assist customers in financial distress. If you’re unable to pay the full instalment, contact your home loan provider and enquire about arrangements, says Ewald Kellerman, chief risk officer of home loans at Absa.
“We have a variety of assistance options for customers in short-term distress, where we consider a lower instalment for a specific period of time,” he says. “Should the distress be of a long-term nature, our team will assist to sell the property and discuss a more affordable home.”
Kuben Gounden, CEO of retail collections, FNB, says the bank has various ways to assist customers in distress. First, the collections department will contact the customer to suggest ways to settle the arrears. Various payment options are available.
“We assist retrenched customers with retrenchment cover by lodging claims,” he says. “We also have a rehabilitative strategy and we’ll attempt to assist customers, even up to the date of the sale in execution. If the customer can repay the arrears, we will assist them.”
Lebogang Gaoaketse, head of marketing, WesBank says, “Generally, arrangements are made to pay off arrears, depending on the customer’s ability to afford it. We have options that extend to even longer than six months.”
If agreements aren’t honoured, clients are contacted to re-instate or revise them. If telephone contact fails, the bank’s customer liaison agents will visit the client to continue the discussion. Gaoaketse says the outcome of many of those discussions would be the conclusion of further arrangements. Only where further deliberations fail, will a last resort be considered.