Minister of Human Settlements Mmamoloko Kubayi’s plan to get the Home Loan and Mortgage Disclosure Act amended has caused a stir in banking circles.
Kubayi said in an interview with talk radio 702 this week that the amendment would allow the state to probe complaints raised by consumers concerning challenges they faced when it comes to access to home loans and mortgage.
Kubayi said the rejection rate for home loans for the previously disadvantaged groups was concerning and shocking.
Banks have cited poor credit scores for those who are being turned away. However, concern has been raised that the rejections are driven by racial segregation.
But the Banking Association of South Africa (Basa) has dismissed suggestions that race plays a role in decisions to extend home loans.
“Allegations of unfair discrimination by banks remain unfounded and are frankly irresponsible. South Africa’s banks hold in trust the savings and salaries of South African workers, professionals and businesses. This makes up approximately 75% of the funding of banks and they have a fiduciary responsibility to protect these depositors’ funds,” the organisation said in a statement.
Basa also said the National Credit Act sets out the affordability criteria for -responsible lending, to which banks must adhere, to ensure that -their clients do not get over-indebted.
The association also said 48% of home loans are declined because of a lack of affordability, while 34% gets rejected due to an adverse credit record and 13% based on unacceptable security.
Basa said it had long acknowledged that the racial inequalities in wealth and ownership in South Africa have their roots in apartheid and has partnered with the government to bolster inclusive economic growth and the transformation of the economy.
“Basa has had several engagements with the Department of Human Settlements’ office of disclosure about the Home Loans and Mortgage Disclosure Act. While Basa supports the intention of the act – the promotion of fair lending practices – banks also have a legal obligation to ensure their data and the personal information of their customers is secure,” said Basa.
Standard Bank spokesperson Ross Linstrom said the bank welcomed initiatives that provide clarity for future strategic planning and support for the housing market.
“The bank is in the process of understanding the data requirements to ensure protection of client information. The bank is in the process of studying the data. This initiative is being driven by the Banking Association of South Africa,” said Linstrom.
Absa spokesperson Roxanne Henderson said the bank was committed to expanding home-ownership opportunities for all South Africans.
“Race and gender are not considered when assessing credit and pricing.
“We are supportive of Basa ongoing engagements with the office of disclosure and the Department of Human Settlements to provide clarity on the proposed additional reporting requirements,” she said.
Nedbank spokesperson Lucky Mokabane said the bank is a participant in consultations with the department of human settlements on the proposed amendment to the Home Loan and Mortgage Disclosure Act.
Kubayi said a full disclosure by banks will help stakeholders.
“The data submitted by complying banks, which is incomplete and untransparent, indicates that the lending activities or practices in the home loan market not only perpetuate exclusion, but they are also increasing the inequality gap.
“What is important is to increase transparency in the lending practices.”
