As lockdown moves into its third month, household budgets have become severely constrained. No longer are South Africans simply weathering a storm, and unfortunately for some harsh decisions have had to be taken. Among those is the devastating reality that they may not be able to maintain a home loan repayment and therefore must sell their home, or downsize to a smaller property.
"This is however, not a decision that Absa wants any home owner to make without considering a number of alternative options,” says Mbuyiselo Khumalo, Absa’s Head, Home Loan Collections and Deceased & Insolvent Estates, Retail and Business Bank.
Providing as much assistance as possible to customers during these times is seen as crucial.
Absa will always try to support customers in troubled waters, but such help is dependent on our customer’s willingness and receptiveness to engage and accept alternative options by working with us to reach a mutually workable solution."
React quickly
The first, and most obvious step is to explore and then activate the tools and processes that Absa has presented to the market, which is undertaken with the home loans collections department. “The sooner a customer advises us of their financial situation, the sooner we will be able to look at different plans or options we have in place that will provide some relief for a period of time,” says Khumalo.
“For example, our collections department has forbearance programmes that it can offer based on the nature of a home owner’s financial circumstances, and these are split between short- and long-term plans.
‘Short-term covers the reduction of home loan instalments for up to six months, and dependent on individual circumstances, may even extend as much as up to a year. The monthly bond repayment can be reduced to as low as 25% of the Contractual Monthly Payments in extreme cases.
“Longer-term, the loan could be restructured such as extending the term of the home loan by up to 360 months. However, instituting such a forbearance plan is primarily dependent on a customer meeting the affordability criteria and the fulfilment of the arrangements successfully,” Khumalo continues.
“With the realisation that the Covid-19 Pandemic has resulted in an economic crisis in South Africa with far-reaching effects in our communities, it is our duty to offer assistance and relief to customers. The Absa payment relief plan is made available to all customers whose accounts were less than one month in arrears at the end of February. These customers will receive a three-month payment break to assist with their financial situation. This plan is solely to assist customers in this time of need and loan terms and repayments will be adjusted to further assist the customers.
“I must emphasise however, that each situation is assessed individually and again, the sooner a home owner can identify their financial distress, the sooner we can help them, either by providing debt counselling or in the worst case, introducing them to for example, Absa’s HelpUSell product.”
Market-related pricing
HelpUSell was introduced by Absa before the coronavirus outbreak and resulting lockdown measures were implemented. The programme was designed to help with the sale of a home at a market-related price so that a customer can be in a position to repay their home loan.
Khumalo explains that it had become evident that returns from Sheriff’s auctions were substantially lower than returns from a private- or bank-assisted sale, which can leave a customer in an even greater adverse financial position. “Absa does not want to see our home owners lose their homes, nor be put in a situation where they lose money on the sale of their property. A customer could get a better price for their home than at a sheriff’s auction by implementing the HelpUSell programme.”
Broad-based marketing
HelpUSell is activated through a consultative process, after which a network of real estate agents are engaged to help advertise the property, one of which is the Private Property website. “All HelpUSell properties are listed and marketed on the Private Property portal,” says Khumalo, “This enables a bigger visibility of the properties beyond inclusion within our own listing efforts, and thereby more competitive prices can be realised to the benefit of a distressed customer.”
Essentially HelpUSell works most favourably for the customer if the sale price of the property is less than the outstanding balance on the home loan. Discounts on that outstanding amount (shortfall) are:
- 50% discount if the customer is behind on the instalment 3 months or less.
- 30% discount if the customer is behind between 3 and 6 months.
- 10% discount if the customer is more than 6 months.
Shortfalls
But what if there is a shortfall owing on the bond balance after sale? “We can assist the customer with any outstanding costs and then allow the customer to repay those together with the shortfall, in affordable monthly repayments,” answers Khumalo.
“Also, if the home does prove difficult to sell, we will, together with the estate agents, consider market conditions, whether the price is fair, and determine if there are any further concessions or rebates that can be implemented to assist in selling the property.
“It is only when the property does not sell through these various processes, and the customer is not in a position to repay the mortgage loan repayments, that the property will go through a collections and foreclose process. This is obviously not in anyone’s best interest and at Absa we are very reluctant to reach this point,” says Khumalo.
Current and post-lockdown expectations
It is also with some sadness that Khumalo believes that the severity of the difficulties imposed by the coronavirus, translates into Absa expecting an increase in home owners taking up the HelpUSell programme. “During the lockdown our agents are undertaking virtual and desktop valuations, which we expect to become the new norm even post lockdown. Digitalisation is our future and we encourage any form of innovation to keep the market active.
“It must be stressed however, that HelpUSell does not change the conditions of the original home loan agreement, and as the discounts suggest, the sooner the customer engages with us to activate the HelpUSell, the better for them, says Khumalo.