Johannesburg - Government may have lost patience with the financial sector's failure to provide homeloans to lower-income earners, and could be gearing up to become a more aggressive participant in the retail mortgage market.
In his state of the nation address on Thursday, President Jacob Zuma said a "new" initiative will be launched to accommodate workers whose salaries are too high for government subsidies, but too low to qualify for a bank mortgage.
He announced the set-up of a R1bn guarantee fund to incentivise the private banking and housing sector.
However, on Friday the banking sector was still in the dark about the issue.
"At this stage there are no details about it," said Marius Marais, CEO of First National Bank's (FNB's) Housing Finance unit.
Marais said he has raised the issue of a guaranteed fund with the department of housing "some while back", and that such a fund would result in lower interest rates for this segment of the market as well as offer a guarantee for home loans.
Such a fund could open the door for a government-owned financing institution along the lines of Freddie Mac and Fannie Mae in the US.
'Have their work cut out'
One item Marais said had been discussed was that such a fund would serve as a risk underpin.
"If things go beyond the normal control of the banking world - like the current economic cycle and massive systemic risk like job losses - it will be helpful to have a form of a risk fund for assistance," he said.
"Government can put in the seed capital, and the private sector should be able to leverage off that," Marais said.
This was backed up by Luthando Vutula, managing executive of Absa Home Loans. He told Fin24.com: "Absa was aware of government's intention to find a solution to the inability of lower-income earners to access housing finance. However, we were unaware of the R1bn guarantee mentioned in the state of the nation address by the president."
Vutula added that he thought a "partnering approach" is required to address housing needs. He pointed out that government is in fact a direct participant in the housing market through through the National Housing Finance Corporation.
However, FNB property strategist John Loos said: "I am not aware of any moves afoot; they have their work cut out with other parastatals at the moment. I can't imagine a Fannie Mae-type institution."
Loos said a new fund may be more along the lines of incentivising the banks by offering a subsidy which would act as a deposit.
Other analysts pointed out that by introducing a fund of this nature, which would participate directly in the market, it would potentially have to extend its lending criteria beyond the guidelines of the National Credit Act.
- Fin24.com