select
|

High level of impaired credit records - the number one challenge facing bond originators

The fact that many of South Africa’s bond originators have been able to increase their “hit rates” (i.e. to achieve a higher percentage of accepted bond applications) this year is remarkable considering the “staggering” rise in debt payment defaulting, says Mike van Alphen, National Manager of Rawson Finance, the Rawson Property Group’s bond origination division.

Referring to a statement recently disseminated by Nomsa Motshegare, CEO of the National Credit Regulator, van Alphen said that the quarter that ended in March 2013 showed an alarming increase in impaired credit records.

“There are now,” he said, “20,08 million credit-active consumers in South Africa, a figure which is 0,6% up on the previous quarter. However, the number of creditors in good standing in the last quarter decreased by 76,000 — to 10,5 million — while the number of consumers with impaired records rose by 189,000 to 9,53 million. This, as the National Credit Regulator has pointed out, represents 47,5% of all South Africa’s credit active consumers — a very unsatisfactory state of affairs.”

The very real danger now facing the SA housing sector, said van Alphen, is that many potential bond applicants with impaired credit records could easily get the impression that they will never qualify for a bond and will be forced to rent their homes in perpetuity — but this is not the case.

“If they will just get in touch with a good bond originator, many can be shown how to reinstate themselves as credit-worthy customers,” said van Alphen.

This, he said, is often possible if their credit arrears are only in the current debt category (roughly 37% of credit impaired debtors are listed here) or are one or two months in arrears (approximately 15% of the total) or even if they are three or more months in arrears (approximately 20%).

“In cases like these, making an arrangement, with the help of the originator, to pay off the debt in a stipulated period can and does result in the debtor once again being accepted as a prospective borrower/mortgage loan applicant.”

Where a consumer has had a court judgement against him on account of an unpaid debt or where the size and number of his debts has resulted in his being black listed by the Credit Bureau, it is far harder to reinstate him, said van Alphen, but even here avenues can be opened to achieving this.

Van Alphen commented that in dealing with peoples’ credit records that are now impaired, one has to realise that this has often come about as a result of high pressure salesmanship, which has inveigled the consumer into a hire purchase agreement.

“Offered the chance of, say, acquiring a car, a suite of furniture, a flat screen TV, or new kitchen equipment on seemingly reasonable monthly payments, the consumer can all too easily overlook the fact that a few months down the line he may be on a reduced income or even have no income at all — a possibility that the salesman will not have taken into account. Very few hire purchase customers plan to default — they end up doing so because they are too confident of future income. Since the implementation of the Consumer Protection Act, this should be happening less, but so far we have seen no difference.”


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 17 Jan 2018
      While the current property market may still favour buyers, it doesn’t mean that they shouldn’t be well prepared before putting in an offer to purchase.
    • 17 Jan 2018
      Lightstone lists Blair Atholl as the most expensive suburb with an average house price of R11.2 million, followed by Westcliff (R10.5 million), Dunkeld (R9.3 million), Sandhurst (R9.1 million) and Inanda (R7.2 million).
    • 17 Jan 2018
      As it currently stands, there are four main ways in which a home can be bought in South Africa, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, who adds that deciding in which legal entity to purchase the property is not a decision that should be entered into lightly, as each has its pros and cons.
    • 16 Jan 2018
      The start of the new year is symbolic of new beginnings. A good time to take stock of one’s possessions as well as how necessary they actually are. However, seeing as the process may appear daunting – a plan goes a long way.
    • 16 Jan 2018
      The Western Cape is still in the throes of a severe drought and many households have to adjust the way they use and save water. It is a little more complicated in sectional title schemes, however, as it is not that easy to implement grey water systems for multiple users and it is also difficult to monitor water usage accurately if there are no separate water meters
    • 15 Jan 2018
      In ideal rental situations, when a lease is signed the tenant will stay for the full duration of his lease without any complications and the landlord will uphold his obligations, creating a win-win situation for tenant and landlord.
    • 15 Jan 2018
      The Atlantic Seaboard’s housing market has stoically withstood the brunt of the growing economic and political instability, consistently achieving double digit growth way above the national average, however, in 2017 South Africa’s most resilient market finally began to yield to the pressure.
    • 15 Jan 2018
      Sectional title insurance can be a little confusing and, as a new owner, you may be tempted to just assume your body corporate has you covered. While this may be the case, understanding the extent of your coverage and your personal liability is the only guaranteed way to protect yourself against potentially costly oversights.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK