Banks sell repo homes for a song

EVIDENCE: PROPERTY WORTH R1.3M SOLD FOR R1 000 Class action seeks to recover billions of rands in lost homes as a result of practice.

It’s been known for years that the banks have been flogging off repossessed properties for a fraction of their market worth, but the evidence was anecdotal and fragmented. Not anymore.

An affidavit filed in support of the R60 billion class action suit brought by Lungelo Ditokelo Human Rights Foundation against the major banks, based on a sample of about 12 000 repossessed properties, found that these properties were sold for 5060% of their proper value, mainly through sheriff’s auctions.

The class action suit, which is being defended by the banks, seeks to recover billions of rands in lost home equity as a result of this practice.

What is disturbing about this evidence is how far out of line SA is with practices elsewhere in the world. “Our South African banks sell property about five times more than the international average as a percentage of the total number of outstanding bonds and 20 times more than best practice,” says Garth Zietsman, a statistician who analysed data from the National Credit Regulator.

Even more disturbing is that the poor are worst-affected.

Lower-valued homes were sold for about 40% of their market value, against 81% for the higher-valued ones. The evidence shows dozens of properties were sold for less than 1% of their market value. Of the 200 worst cases, all were sold for less than 17.2% of their market value.

The banks have yet to file their replies to the case.

In one case highlighted by Zietsman, a R1.3 million property was sold for R1 000 at auction.

In this case, the lending bank was FNB. Standard Bank and Nedbank also had several properties selling at auction for R1 000 when the market value was R200 000 to R440 000. There is no comparable data available for Absa.

King Sibiya, head of the Lungelo Ditokelo foundation, is not convinced of the banks’ self-proclaimed virtue and argues that SA has among the most inhumane practices in the world when it comes to bank repossessions.

“Here we are in the middle of a Covid crisis when millions of people have fallen into arrears on their homes through no fault of their own and the government imagines it is business as usual, where banks can carry on like they have done for decades,” he said.

“Eighty percent of the cases before the high courts are brought by banks attempting to recover debts and evict people. Other countries impacted by Covid put a total freeze on evictions, while we imposed a freeze of three months. There’s no justice in that.”