SA Bank Responds to Criticism Over Home Loan Withdrawals

FNB Clarifies its Decision

Recently, it was reported that the Ombudsman for Banking Services fired a warning shot at FNB for its decision to withdraw home loan approvals on a large scale. An article by Realestateweb discusses the bank’s reaction to a “frank” meeting with the Ombudsman, in a bid to clarify which home loans are to be pulled.

A Big Four bank, FNB has assured developers that it will try and help those who are in financial trouble as it withdraws loan approvals for properties under construction. It also said that it will not reassess recently approved home loans that would normally take three to four months to register.

These assurances come in the wake of a “frank” meeting with the Banking Ombudsman, who recently fired a public warning at the bank, which has largely been seen as an unprecedented move. FNB’s decision to withdraw home loans on a large scale, as reported in an earlier article, will have major implications for developers, intermediaries and other players in the residential property industry.

After meeting with the Ombudsman, advocate Clive Pillay, the bank said that its “original statement on its reassessment decision may not have been clear and may have inadvertently caused unnecessary confusion and concern”. It went on to say that FNB and Pillay have since “agreed that the bank’s criteria, as now spelt out, for reassessing home loans approved in principle more than a year ago are ‘fair and equitable’”.

According to FNB, the home loan applications to be reassessed are those that take up to a year or longer to register and are of a development-type nature (excluding building bonds), not those that usually take three to four months for transfer and registration. Its intention is to “prevent customers from taking on more debt they are unable to service, resulting in an over-indebtedness position”.

The bank will only reassess applications should the following criteria apply:
- Where FNB guarantees have not already been issued;
- Any judgments or defaults evident with credit bureaus arise between the original granting of the home loan and prior to registration of the property;
- Customers confirm they are unable to afford the home loan subsequent to the original approval.

Each home loan will be reassessed “on a one-on-one basis with the intention of granting final approval for as many of the affected customers as possible. The bank will only decline applicants in cases where the client will be severely over-indebted should the transaction go ahead,” the bank said.

Customers who failed to provide their updated financial information are required to confirm their intention to go forward with the deal, otherwise FNB will contact each of the identified customers with the intention to proceed with the home loan, unless any of the above criteria are applicable.

Also, FNB is aware of the “impact its decision may have on any one developer and their financial institutions and will accordingly engage with them to find an amicable solution to mitigate any undue losses that may arise”.

The information in this article is courtesy of Realestateweb (“FNB: most new home loans “safe”, 12 August 2008).

Visit www.sahometraders.co.za if you would like to buy or sell property in South Africa.