We must behave responsibly
Date: 2009-06-25
A recent article in the media highlighted how the implementation of the National Credit Act (NCA) has hampered the banks’ ability to recover unpaid mortgage debt by foreclosing on the property in question. This could result in banks becoming even more risk averse.
While the article was informative, the readers’ response to the article was positively alarming. Some suggested that the NCA is part of some conspiracy theory and others felt powerless against the big corporations who are “ripping” them off. The ultimate response was a reader calling for properties to be destroyed before being repossessed.
With every debt transaction, there is a willing lender and an equally willing borrower. While the lender may use all forms of marketing in order to attract the potential client, the borrower will equally use all forms of persuasion in convincing the lender to part with its money.
Under the current economic climate, many find themselves over-indebted due to reasons beyond their control, such as retrenchment and loss of income. However, there are also many who were willing to take the risk, hoping to gain capital growth on their property investment, without dipping into their own cash-flow. Making money using the banks money! Unfortunately, this has not turned out as planned and they need to take responsibility for the risk they were willing take.
Even though, in time, the NCA will need to be reviewed, it was never intended to protect those who wish to abuse the system, as illustrated in a recent court judgment in which the judge declared; "In any event my view is that the NCA does not envisage that a consumer may claim to be over-indebted whilst at the same time retaining possession of the goods which form the subject matter of the agreement. Such goods should be sold to reduce the defendant's indebtedness"
Desperate situations, doesn’t call for desperate measures, but for consideration, responsibility and collaboration. Property owners, who find themselves in financial difficulty, should take immediate action:
• Put your property on the market as soon as possible. Avoiding falling into the category of “a desperate seller” will increase your chances of obtaining a fair market value for your property.
• Contact the bank and make new repayment arrangements. Avoid foreclosure at all costs.
• Seek debt-counseling.
• Take all three actions simultaneously
If you are to get any leniency from the courts, you need to prove that you have taken all the necessary steps to avoid having landed before the courts in the first place.
A threat to the stability of our financial institutions is a direct threat to the stability our economy. The banks provide the oil that keeps the wheels of our economy turning. They fund new business ventures. They assist individuals in owning a home and provide a relatively risk-free haven for people to deposit their surplus cash. Imagine if this fair trade had to stop because the banks were unable to recover defaulting debt timeously? Consumers must behave responsibly.
Tess Rodrigues
Managing Director