If you are struggling to pay off the home loan on your primary residence and miss a few payments, your home-loan provider cannot foreclose on your debt and repossess your property without first attempting to reach an agreement with you on restructuring your loan so that you can keep your home.

In a recent case that went to the Supreme Court of Appeal, First National Bank (FNB) was obliged first to take steps to engage and negotiate with a defaulting consumer before being granted a court order to sell the consumer’s house in execution.

According to the Supreme Court judgment, in 2009 Mr M bought a house with the aid of a home loan of R432 000 from FNB. The loan was to be paid back over 20 years, and the initial monthly payment was R3 337.

In 2015, Mr M fell into arrears with his repayments. FNB sent him a letter, which was hand delivered on July 6, 2015, informing him that he was almost R13 000 in arrears and therefore in breach of the loan agreement. Mr M did not respond to the letter.

Subsequently, on July 23, 2015, the bank sent a notice in terms of section 129 of the National Credit Act. Section 129 of the Act sets out a number of requirements for how credit providers must deal with defaulting debtors. It reads: “If the consumer is in default under a credit agreement, the credit provider … may draw the default to the notice of the consumer in writing and propose that the consumer refers the credit agreement to a debt counsellor, alternative dispute resolution agent, consumer court or ombud with jurisdiction, with the intent that the parties resolve any dispute under the agreement or develop and agree on a plan to bring the payments under the agreement up to date.”

According to the judgment, Mr M still did not respond or communicate in any way with the bank. As a result, in August 2015, FNB sued Mr M in the Gauteng High Court for the total remaining amount of R262 331. In addition, the bank sought an order declaring Mr M’s property executable.

The summons was served on Mr M’s wife, with the return of service reflecting that Mr M was “temporarily absent”.

Mr M did not defend the action, so the bank applied for a default judgment.

The matter was heard by the High Court on October 8, 2015. The decision by the court was to postpone the hearing for six months, in which period FNB was to attempt to engage with Mr M to prevent foreclosure.

The bank was directed to provide an affidavit detailing these efforts to enable Mr M to keep his home at the rescheduled hearing.

The court noted that the summons was not served personally on Mr M, as required by the High Court, and the amount by which Mr M was in arrears was relatively low and had not been outstanding for a very long period.

FNB took the case on appeal to the Supreme Court. Judge Jeremiah Shongwe ruled that the High Court’s decision to postpone the case was not appealable, because it was not a final judgment. The appeal was struck off the roll.


WHAT TO DO IF YOU CAN’T PAY

Don’t put your head in the sand if you can’t afford your repayments. Communicate with your bank, and it will normally do its best to accommodate you or restructure your payments. The arrangement may include interest-only payments for a specified period, a three-month payment holiday, or reduced instalments over a specified number of months. (Remember that during a “payment holiday”, interest on the bond will continue to mount, so you end up paying more in the long term.)

You may opt to enter debt review or, if you are heavily over-indebted, debt counselling, in which case the debt counsellor may negotiate agreements with your credit providers.

If you realistically cannot afford to keep your home, your bank may offer assistance in selling it. This is not the same as the bank repossessing your home.

In March 2014, Personal Finance published an article on what to do if you are battling with your mortgage bond repayments. The article, “What if you can’t pay your bond?”, can be found on our website, www.persfin.co.za