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My House Is Being Foreclosed On – What Can I Do?

Hammond Pole Attorneys > Hammond Pole Blog  > My House Is Being Foreclosed On – What Can I Do?

My House Is Being Foreclosed On – What Can I Do?

House foreclosure can leave you confused and at odds about what decisions to make to avoid unnecessary losses, but there are ways you can find relief. Below we outline what it is and what you can do to manage it more effectively.

 

What is foreclosure?

Foreclosure occurs when a lender, usually a bank or other lending institution, repossesses a home due to missed bond payments after several attempts to initiate repayments with the borrower.

 

Foreclosure usually begins after a borrower has missed three payments. These missed payments can result from various personal challenges, including job loss, reduced income, divorce, illness, or significant debt. It is important to note that foreclosure is typically the lender’s last resort, initiated only when alternative debt management options have been exhausted.

 

Legal frameworks that govern the foreclosure process in South Africa

You will encounter various legal terms if you face a foreclosure process. Below we highlighted two important governing legal frameworks to be aware of, keeping in mind there are others.

 

The National Credit Act (NCA)

Serving to protect consumers’ rights, it allows them to seek out debt counselling or management services. It is a legislation that serves to regulate fair credit agreements and practices.

 

The Uniform Rules of Court – Rule 46A

These are conducts and procedures that apply to the High Court. Rule 46A mandates a reserve price set by the court to safeguard fair prices. The court will conduct the necessary assessments to determine a fair price. If the property is still not sold, the court can be consulted about reducing its price or removing it so the sheriff can sell it.

Steps of the foreclosure process

There are five important steps to know once the foreclosure process starts. This occurs when the lender initiates contact with the borrower about missed payments.

 

1.    Notice in Terms of Section 129, 86(10) and 88(3) of the National Credit Act

When a borrower falls behind on their credit repayment, South African law, under Section 129 of the National Credit Act, requires creditors to issue a notice before initiating legal action. This Section 129 notice informs the borrower of their default and provides options to resolve the issue – whether through debt counselling, restructuring the payment plan, or settling the debt directly.

 

Its important to act when you receive this notice to avoid further legal complications, like foreclosure or repossession.

 

While Section 129 is about protecting the consumer’s right to be notified, it is also crucial to understand how this interacts with other sections of the National Credit Act, such as Section 88(33) and Section 86(10).

 

Section 88(3) places an obligation on the consumers under debt review to stick to their restructured payment plan and avoid taking on additional credit. If you default while under debt review, the protection of the debt review process may no longer apply.

 

Section 86(10) allows a creditor to terminate the debt review process if the consumer fails to meet these obligations, or if the review process drags on without resolution. Once terminated, creditors can proceed with legal enforcement.

 

By staying informed and addressing the Section 129 notice quickly, you can take action to safeguard your financial position.

 

2.    Summons and Judgment

A summons is issued as a formal notification to the borrower, indicating that the lender intends to proceed with legal action due to default on the loan. This summons serves as a prelude to the filling of a Rule 46(A) application, through which the lender seeks a court judgement. The judgement typically includes an order for the borrower to repay all outstanding debt, along with legal costs, accrued interest, and, most significantly, the declaration of the property as executable. This means the property may be sold to recover the debt, underscoring the importance of addressing the situation promptly to avoid further legal consequences.

 

3.    Rule 46A of the Uniform Rules of Court

According to Rule 46A, the court will determine a fair market value price, also termed the reserve price of the home. This also ensures that it is not marketed lower than it needs to be. In determining the reserve price, the court takes into account numerous factors, including but not limited to, outstanding rates and taxes as well as any unpaid levies. This process is designed to protect the interest of both the borrower and the creditor, ensuring fair and equitable sale of the property.

 

4.    Writ of Execution

Once the court has made a judgment, the Writ of Execution will authorise the Sheriff of the High Court to sell the property.

 

5.    Auction

The property will be sold through a public auction. The money is used to settle outstanding payments. Additional funds will be returned to the borrower, and conversely, they will be required to pay residual debt or shortfalls.

What are your options?

While foreclosure is a daunting reality, you have options. You can try the route of privately selling your property, which can assist in paying off the mortgage, however, drawbacks to this approach can be a slow property market and not enough time to sell.

 

Another option is distressed sales, which involves selling the property under urgent circumstances and can offer better sales than through an auction. Consulting your bank about their offerings is the best advice if you are interested in this route.

 

Remember that foreclosure is a complicated process. It would benefit you and the respective financial institution in mitigating it. That is why seeking out payment agreements is advised. This can look like renegotiating and revising a payment plan or asking for temporary relief. Whatever your case, ensure you have explored all available and potential solutions. It may save you money, time, and mental well-being.

 

Don’t wait until it’s too late—reach out to Hammond Pole today to discuss your options and secure the best possible outcome for your situation.

 

Blog By: Dylon Fisher
Dylon Fisher:  DylonF@hammondpole.co.za

 

 

 

 

 

 

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