It is always best to maintain your home loan instalment payments to your lender. Not only does it ensure that you maintain a healthy credit score, it also means that you repay the capital portion of your loan on time. By doing this, you avoid additional interest that accrues on the higher outstanding loan balance. However, you may find yourself in a position where you are struggling to honour your financial obligations and you are now in default with your home loan instalments.
We understand that our clients do not willingly default on their commitment to us, especially since a default on instalments has a negative impact on your credit score which will likely limit the credit that will be available to you in future. We know that your home loan is your most important investment and provides security to you and your family, so we believe that an honest and open discussion around the reasons for the default will go a long way towards finding a solution that is to our mutual benefit.
Each client’s situation is different and a “one size fits all” approach will not result in the best outcome. It is for this reason that each client is assessed individually before a decision is made about whether an arrangement is the appropriate solution for their needs. Because of this approach, we have developed a structured information gathering process that will assist us in identifying possible solutions to recover the arrears, and twill provide you with a clearer understanding of your financial situation. Should you have any questions about the settlement of your arrears or about entering into an arrangement please contact us on 086 111 3414.
I have received a Section 129 Notice
If a client is unable to meet their repayment obligations under the home loan agreement, and there is no suitable arrangement in place, we reserve our right to commence legal action. A Section 129 notice is the start of this process.
A Section 129 notice is formal notification in accordance with the National Credit Act No. 34 of 2005, in which SA Home Loans makes you aware of your rights under the Act. The purpose of the Section 129 notification is therefore to inform you of the following:
I have defaulted and I am now in foreclosure
Although we will make every effort to assist you in rehabilitating your home loan, there may come a time that we need to initiate foreclosure proceedings to recover the outstanding liability due to us.
In the event that the foreclosure process has commenced, a number of steps will follow:
A letter of demand serves to inform the debtor and / or surety of an amount that is being claimed within a stipulated period.
In the pleading stage a summons setting out the Plaintiff’s (i.e. SA Home Loan’s) details of the claim is served on the Defendant (the bondholder that has defaulted). Once a summons is served on a Defendant, they have 10 Court days in which to defend the action. Court days are all calendar days excluding weekends and public holidays. If the Defendant does not defend the action the Plaintiff is entitled to request default judgment.
It is a judgment in favour of a Plaintiff when the Defendant has not responded to a summons or has failed to appear before a court of law.
A default judgment will severely injure your financial future and should be avoided at all costs. Some of the consequences of a default judgment are:
If the debtor does not honour a Court judgment, the creditor may issue a warrant / writ of execution in terms whereof the Sheriff of the Court may attach and sell as much of the debtor’s property as necessary to satisfy the judgment.
A sale in execution is a public auction of a bonded property by the Sheriff of the Court. A sale in execution is usually the last step that is taken when clients are unable to service the home loan repayments; the home loan is in arrears, and all other efforts at rehabilitating the loan have failed. Properties sold in this manner must be advertised in the Government Gazette and two local newspapers.
If the property is sold on auction, the bondholder will remain liable for the payment of any shortfall and legal costs, including the costs to sell the property at the sale in execution – this shortfall is the difference between what the property is sold for and what is owed on the bond plus interest and costs incurred.
As emphasised throughout, we strongly advise our clients to proactively manage their finances and in particular their home loan instalment commitments. It is also important that you pay your rates and utility bills on time and continue to maintain your property so that the value does not decrease. Legal action is always the last resort, and is costly both for SA Home Loans and our clients. In addition to the arrangement options discussed previously, we provide a further service to our financially distressed clients.
It is generally better to sell your property privately than for it to be sold at a sale in execution as you will usually receive a higher price.
This is a programme where SA Home Loans will assist you to market the property through our network of estate agents. The agents charge reduced commissions ensuring that you receive the maximum amount for your property. You retain control of the sales process and will have to accept or reject any offers that are received.
My property is sold and there is a shortfall
If it was not possible to rehabilitate the loan, the final outcome may be that the property is sold at a sheriff’s auction or sold privately or repossessed by SA Home Loans. A shortfall will arise if the proceeds of the sale are not sufficient to fully repay the outstanding balance on the home loan. At this point, SA Home Loans can still institute legal action to recover on the shortfall if there is no suitable repayment arrangement in place.
I am in debt counselling
Debt counselling is a process established by the National Credit Regulator (NCR) that consumers can use if they are no longer able to manage their debt obligations.
The credit records of consumers that apply for debt review are updated to reflect this status and, while it remains active, access to further credit will not be possible.
The debt review process starts with a debt counsellor assessing whether you are over indebted. If you are found to be over indebted, the debt counsellor will propose a restructuring of your debt and will submit the proposal to your creditors. However, all judgments that are in existence at the time of applying for debt counselling are excluded from the debt review process.
Although debt counselling can help you regain control over your financial situation, it should be considered as a short-term option. As soon your financial health has improved you may wish to consider whether it is an appropriate time to exist the debt review process.