Banks declare fall in repossessed houses

Johannesburg - The number of houses that banks have had to repossess owing to mortgage defaults has declined, but there seems to be no pattern regarding price categories of most of the repossessed houses, South Africa's largest banks say.

At Nedbank the average price of houses taken back is between R350 000 and R400 000, with very few exceeding R1m while at First National Bank (FNB) most of the repossessed houses fall in the price range R800 000 to R900 000. Dwellings on which large mortgages have been granted are a problem at Absa, the country's largest retail bank says.

Nedbank currently has 1 800 repossessed homes, but these comprise less than 1% of its total home loan book. At Absa, the number of repossessed houses represents less than 0.01% of all home loans.

Standard Bank declined to comment.

The banks ascribe the decline in the number of repossessed houses to their efforts to help homeowners to either keep their houses or sell them.

Absa home loans managing executive, Luthando Vutula, attributes the decline in repossessions to improved economic conditions.Yet FNB and Nedbank believe that consumers are still under pressure.

FNB home loan division CEO, Jan Kleynhans, says consumers are still under strain because of massive indebtedness and widespread unemployment.

The banks are doing their best not to lose money when repossessed houses are sold, and believe that the best way is to sell a house by private auction and not to wait until it has to be sold in execution since sales values are then much lower.

André Potgieter, who is in legal collections at Nedbank, says that the bank buys houses back only if the reserve price set by the bank is not obtained at an auction, a regulation also observed at FNB.

Up to 80% of the property value is generally achieved at a private auction while only 55% to 70% of the property value is achieved when sold in execution, says Potgeiter.

The reason why houses sold in execution fetch lower prices is because the house falls into decline during the legal process, which can take up to eight months. If there is no money to meet the mortgage payments, there is certainly no money to maintain the property.

Vutula says that "less than 100%" of the repossessed houses are currently being sold since people are looking for bargains. Affordability is also a problem in this fragile economy.

Kleynhans says most of FNB's repossessed homes are in fact sold.

- Sake 24