Human Settlements officials have raised their discomfort over how financial institutions carry out repossessions in recovering outstanding loan balances of less than R100 000 on defaulted mortgage loans by low- and middle-income earners.

The Mercury reports that Human Settlements Minister Mmamoloko Kubayi said the EFF raised concerns in Parliament that a number of home repossessions would be triggered due to the several increases in the prime lending rate by the SA Reserve Bank last year.

Kubayi told MPs her department was holding ‘periodical’ meetings with banks, to discuss government concerns over the nature of foreclosures and repossessions in general. However, she said, last year’s increases in the prime lending rate would not lead to immediate mass home repossessions as it could take up to 39 months for a property to be auctioned off.

‘The national Department of Human Settlements has already sensitised the Banking Association of SA (Basa) about its concerns over the nature of foreclosures and repossessions in general during its periodical meetings with Basa,’ Kubayi said, adding the department was crafting an intervention strategy premised on the basis of risk-sharing measures between the government and Basa to address this fundamental concern.

‘Our interventions are not attributable to cyclical fluctuations in interest rates, but to financially distressed households within the low- and middle-income bracket.’

She said the prime lending rate upticks last year had ‘relatively no effect with respect to foreclosures and repossessions’ due to the time lag to factor interest rate increases in the market, and the amount of time that it took to repossess and re-sell a property.

Full report in The Mercury