Housing slump batters Finbond

Johannesburg - The housing market slump has forced micro-lender and mortgage originator Finbond Property Finance to reduce its mortgage origination staff by 66% in the past financial year.

"Our three mortgage origination businesses were rationalised and consolidated in order to contain costs and attempt to remain profitable," said the company in its results. /p>

"The services of approximately 66% of staff in this division have been terminated."

Finbond said given the recessionary environment, the business will be further rationalised and restructured.

The big four commercial banks have turned the screws on mortgage finance applications submitted by mortgage originators, with Standard Bank severing ties altogether.

"Due to much stricter lending criteria, the other three major banks are declining about 70% to 90% of mortgage applications submitted by mortgage originators," said Finbond. For instance, of the 7 499 home loan applications Finbond submitted during February, only 712 were approved.

The company's monthly mortgage origination volumes have declined from R1.8bn in May 2007 to R198m in April 2009. This does not reflect revenue due to Finbond, but the value of approved home loan applications on which it earns commission.

The result has been a total mortgage origination revenue decrease of 54.1% to R91m, from R199m the previous year.

While Finbond CEO Willie van Aardt was not available for comment at the time of writing, the company did say that further decline was expected.

To counter the negative effects of the property slump, Finbond has been aggressively ramping up its micro-lending business. It said revenue from the business grew 48.8% to R134m (interest and admin fees) while the loan book grew 10.4% to R154m.

Through acquisitions, it added a further 60 branches to its portfolio of 119 branches across South Africa.

Finbond shares were untraded on Monday morning. Its closing price on Friday was 28c/share.

- Fin24.com