ACCESSING HOUSING FINANCE IN THE COUNTRY SOUTH AFRICA DIRECTOR : OFFICE OF DISCLOSURE DEPARTMENT OF HUMAN SETTLEMENTS

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1 ELIMINATING DISCRIMINATION IN ACCESSING HOUSING FINANCE IN THE COUNTRY SOUTH AFRICA PRESENTER : MR. G. PHOKU DIRECTOR : OFFICE OF DISCLOSURE DEPARTMENT OF HUMAN SETTLEMENTS 1

2 TABLE OF CONTENTS 1. BACKGROUND 2. HOME LOAN AND MORTGAGE DISCLOSURE ACT, 2000 (ACT 63 OF 2000) )(HLAMDA) 3. ESTABLISHMENT OF THE OFFICE 4. COMPOSITION OF THE OFFICE OF DISCLOSURE 5. FUNCTIONS OF OFFICE OF DISCLOSURE 6. HOW WE EXECUTE THE MANDATE 2

3 TABLE OF CONTENTS 7. WHO IS TO COMPLY WITH THE ACT 8. LIST OF FINANCIAL INSTITUTIONS 9 ENGAGEMENTS WITH STAKEHOLDERS 10. INTERVENTION MEASURES 11. RISKS INHERENT TO THE HOME LOAN PROCESS 12. ACHIEVMENTS 13. CHALLENGES 14. WAY FORWARD FOR THE OFFICE 3

4 BACKGROUND The Home Loan and Mortgage Disclosure Act,2000 ( Act No.63 of 2000) (HLAMDA) was enacted in The regulations were Gazetted on 13 July 2007 as Notice 842 of In terms of Presidential Proclamation No. 15 of 2007 the Act came into operation with effect from 02 July

5 HOME LOAN AND MORTGAGE DISCLOSURE ACT, 2000 (ACT 63 OF 2000 )(HLAMDA) PURPOSE OF THE ACT To promote fair lending practices, which require disclosure by financial institutions of the information regarding the provision of home loans; to establish an Office of Disclosure; and to provide for matters connected therewith. The Act gives the Office a mandate to monitor the financial institutions lending practices and patterns through receiving and analysing information. 5

6 ESTABLISHMENT OF THE OFFICE The Office of Disclosure is established in terms of Section 4 of the Act while members of the Office are appointed in terms of Section 6 of the Act. 6

7 COMPOSITION OF THE OFFICE The Chairperson and 8 Members of Office appointed in terms of Section 6 of the Act; In terms of Section 8(1) of HLAMDA, Period of office, vacation of office and filling of vacancies, A member of the Office must be appointed for such period, not exceeding three years, as the Minister may determine at the time of appointment. 7

8 FUNCTIONS OF OFFICE OF DISCLOSURE (a) Receiving the required information; (b) Analysing and interpreting the required information; (c) Receiving and investigating public comments on financial institutions relating to home loans; (d) Making available to the public, information that indicates whether or not financial institutions are serving the housing credit needs of their communities and rating such financial institutions in accordance with such information; 8

9 FUNCTIONS OF THE OFFICE OF DISCLOSURE (e) Assisting in identifying i possible discriminatory i i lending patterns and assisting any statutory regulatory body in enforcing compliance with anti-discriminatory legislation; (f) Reporting to the Minister annually in respect of its work during the preceding year, and such report must include analysis of the performance of each financial institution in complying with the terms of the Act; and (g) Making recommendations to the Minister on any matter falling within the scope of this Act. 9

10 HOW DO WE EXECUTE OUR MANDATE HLAMDA REGULATIONS The regulations have been made in terms of Section 12 of HLAMDA. The regulations have been implemented with its set of guidelines to financial institutions on how information must be disclosed to the Office simultaneously with the Act through a Government Gazette Notice No. 842 of 2007 with effect from 2 July SECRETARIAT The Department has established a Secretariat of the Office of Disclosure within the department to carry out the mandate in terms of Section 11 of the Act. 10

11 HOW DO WE EXECUTE OUR MANDATE REPORTING FORMAT The Compliance Manual is a guiding tool on how information should be disclosed to the Office. ANNUAL RETURN FORM This is an aggregated information captured as follows: (1) The total number and Rand amount of applications - (a) Received (b) Approved (c) Declined (d) Disbursed (2) The total number of applications received, approved, declined, and disbursed, respectively, in respect of: (a) Race groups (African, White, Indian, Coloured) (b) Province 11

12 WHO IS TO COMPLY WITH THE ACT All financial institutions that are registered in terms of the Banks Act,1990 (Act No. 94 of 1990). All registered in terms of the Mutual Banks Act,1993 (Act No. 124 of 1993). Any registered financial institution whose business is, in full or in part either the acceptance of deposits from the general public, the advance of credit to persons or both such acceptance and advance, with the security of a registered ed mortgage bond or any other form of accepted security for the purpose of providing home loans. 12

13 LIST OF FINANCIAL INSTITUTIONS ABSA Bank Limited African Bank Limited Albaraka Bank Bank of Baroda Bank of China Jhb Branch Bank of Taiwan SA Branch Bidvest Capitec Bank Limited Citibank Credit Agricole & Investment Bank Deutsche Bank AG Jhb Branch First Rand Bank Limited GBS mutual Grindrod Habib overseas HBZ Bank Ltd Hong Kong & Shangia Investec Bank Limited Ithala Ltd 13

14 LIST OF FINANCIAL INSTITUTIONS JP Morgan Chase Mercantile Bank Limited Nedbank Limited The South African Bank of Athens Limited SA Home Loans SASFIN Standard Bank Societe Generale Standard d Chartered State Bank of India Imperial Bank Limited MLS Bank Limited Nedcor Investment Bank Limited People s Bank Limited Rand Merchant Bank Limited UBank Limited VBS Mutual Bank 14

15 ENGAGEMENTS WITH STAKEHOLDERS Immediate Solutions Annual Return Form Audit Assurance Standards Awareness campaigns Medium Term HLAMDA amendments Amendment of Regulations Amended Compliance Manual 15

16 RISKS INHERENT TO HOME LOAN APPLICATION PROCESSES Financial institutions receive applications from mainly two sources i.e. their walk in customers and from Intermediaries/ Brokers. The loan originators/brokers submit initial loan applications received to all Financial Institution to increase the chance of applicant being approved for funding by at least one Financial Institution. This results in more than one Financial Institution reporting the same applicant in their reported applications. Hence there are multiple duplications in numbers submitted to the Office. This applies to number of approved/declined applications and related amounts as well. 16

17 INFORMATION DISCLOSED BY FINANCIAL INSTITUTIONS Home loan Applications received in terms of income category; Pension backed loans received per income category; Unsecured loans received per income category; Home loan Applications received per province; Pension backed loans received per province; Unsecured loans received per province; Number of all home loans received per financial institution; Number of all unsecured loans received per financial institution; Number of all pension backed loans received per financial institution; Decline reasons; Race groups; Gender /Historically disadvantaged persons.

18 ACHIEVEMENTS A detailed report on HLAMDA prepared for the Minister in terms of the Act; Amendments to legislation identified and forwarded to Legal Services and State Law Advisors for example reporting format, comments vs complaints, penalty; Audit Assurance standards agreed upon between the Independent Regulatory Board for Auditors, BASA and financial institutions auditors in line with audit standards; 18

19 ACHIEVEMENTS Information received from financial institutions; Common reporting period of 01 January to 31 December for all financial institutions which is due on 02 March annually; Amendments to legislation at an advanced stage; 19

20 ACHIEVEMENTS Engagements with Provincial i Human Settlements t Departments and municipalities regarding the mandate of the Office; and Dissemination of information brochures (Complaints Procedure Manuals and OoD Profile) to the public through the provincial departments and municipalities on the functions and responsibilities of the Office. 20

21 CHALLANGES Accounting standards an impediment to financial institutions to comply with section 2 of HLAMDA which requires disclosure of the required information in their financial statements. 21

22 WAY FORWARD OF THE OFFICE Finalisation of amendment of the Act; Amendment of the regulations ; Enhancement of the Reporting Format e.g. to include Finance Linked Individual Subsidy Programme (FLISP) funded loans; Public outreach through consumer education sessions and engagements with local authorities (CDW s s, Ward Committee Members and stalls at shopping complexes); 22

23 WAY FORWARD OF THE OFFICE Strengthen relations with Housing Institutions and other relevant Entities; Stronger engagements with the financial sector; and To improve analysis of information from financial institutions which h will enhance recommendation to the Minister. 23

24 CONTACT INFORMATION OFFICE OF DISCLOSURE DEPARTMENT OF HUMAN SETTLEMENTS PRIVATE BAG X644 PRETORIA JUSTICE MAHOMED STREET SUNNYSIDE, PRETORIA 0001 Tel: (012) / 1572 Fax: / E mail: gaza.phoku@dhs.gov.za g / disclosure@dhs.gov.za Toll free:

25 THANK YOU