Property owners would have been relieved at the most recent announcement that leaves the interest rate unchanged – for now. It’s no secret that many consumers are taking strain financially with everything on the rise, the cost of fuel, the cost of food, the cost of electricity – indeed the cost of living. This pressure may impact homeowners’ ability to meet their monthly bond obligations. It’s a terrible position to be in, but the solution is to act swiftly to mitigate the consequences.
Distressed is the term used to refer to a property where the homeowner can no longer afford the bond repayment and has consistently missed payments – the property is then ‘distressed’. Now, the real question to be asked is ‘what leads to people having to deal with distressed properties?’. To answer this question and give more insight on how emaSwati can deal with distressed properties and how the bank can assist you, a bank mortgage expert says: “The loss or decline of income, increase in interest rates, high cost of living and clients with an unfavourable debt pattern or behaviour of servicing other loans leads to many emaSwati having to deal with distressed properties.”
Banks have advice or assistance which provide individuals facing a distressed property situation to help them navigate through financial difficulties and prevent the loss of their homes and they have policies and procedures that govern lending, mortgage loans included. “Communication between clients and the banks is highly recommended. Should customers face financial challenges, the lines are open for discussions between the two parties so that the best possible solutions are sought collaboratively,” advised the expert.
The process of working with people who are struggling with their mortgage payments or facing foreclosure have options and resources on offer to help you retain your home and with banks’ expertise in the business of providing home loans, they have systems and a team that provide advice during the loan application and through-out the repayment period whenever required.
“We always advise our customers to own loan obligations and inform the bank in times of distress, and to do so in a timeous manner so that we find a solution as quickly as possible. Banks are considerate when evaluating factors that cause clients to be in arrears. For example, during COVID-19, when several customers got affected, some banks had an understanding and became lenient with the affected individuals until the situation stabilised.
“The circumstances can be different; there are those who experience genuine negative financial situations when their source of income declines or stops due to loss of jobs or business closure. On the flipside, there are those who may not give their home loan obligation a priority even when the income is enough, hence the treatment cannot be the same. There is mechanism in place to handle unique situations within the confines of our policies and procedures while being human about it. Banks offer a considerable amount of time to evaluate the risks and to deal with such situations.
“We strongly advise customers to inform the bank about foreseen financial stress or whenever there are unfortunate financial occurrences, so we map out possible solutions of retaining or closing the loan account amicably,” he mentioned.
Specific programmes or initiatives implemented by banks to support emaSwati in maintaining homeownership during challenging economic times:
Client applications all happen to be unique, because the factors considered within the facility will differ for each client. During these challenging economic times, banks tailor distress solutions to suit each situation.
Among other interventions that are considered, here are some examples;
Employment contract expiry: When a client’s employment contract expires and not renewed, portion of gratuity payout is considered to reduce the loan balance while he/she seeks for another job for a period of six months to a year.
Repayment period: In some instances, some banks reschedule repayment period up to retirement age or beyond depending on the nature of the case until the situation destabilises.
Renting out: While clients are still trying to find a secure source of income, property can be rented out to service loan.
Last resort: Before the property is auctioned as a matter of last resort, the client is given an opportunity to sell it at market or bargained value to gain on appreciation effect.
Banks will sit down with the client to thoroughly understand their income and expenditure and explore the different options that may be available to rehabilitate clients under unique financial challenges.
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