About Me

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I am a qualified Attorney. I specialise in Property Law, Commercial Law, Corporate Law and Trusts.
 
Please visit our website at www.prop-law.co.za for more details.
 
I am an elected Committee Member of the Property Committee of the Association of Pretoria Attorneys and through my involvement, I like to ensure that I am constantly at the "sharp-end" of Conveyancing Practice.

I am the elected Chairman on the Gauteng Council of SAPOA. The South African Property Owners Association (SAPOA) is the biggest and most influential institution in the property industry. SAPOA members control about 90% of commercial property in SA, with a combined portfolio in excess of R150 Billion (about $22 Billion). I am also on the National Council and the National Legal Committee of SAPOA.
 
Member of the Institute of Directors South Africa and Member of the Sirdar Governance Panel.

23 April 2014

'The 4 main reasons why banks decline mortage applications'

It is interesting that amongst the 4 "MAIN" reasons, Number 4 is that (in the Bank's view) the property is overpriced.  The article goes on to say that this is the case in less than 1% of declines.  Therefore I don't think it is a "main" reason and perhaps the article should have been titled: 'The 3 main reasons why banks decline mortage applications' ... just saying?

Gareth Shepperson
Commercial and Property Attorney












'The 4 main reasons why banks decline mortage applications'

Almost 30% of all declines from the banks come about because the credit bureaux have data showing that applicants have, at some stage, had a court judgement against them.

However, it is surprising how often clients are not aware that these matters are recorded, says Mike van Alphen, National Manager of Rawson Finance.

Similarly, said van Alphen, the credit bureaux often have on their files in-depth records of arrears on credit accounts. These impaired or blemished records, said van Alphen, quite often do not relate to significant amounts but they will be cause enough for the bank to decline their application.

Such situations are likely to be greatly improved by the new ruling that paid up judgements and debts must be deleted from all records. Potential borrowers in all categories, said van Alphen, should make use of the one free personal credit report per annum, to which every South African citizen is entitled, by which they can gain the latest information on their credit position. To do this, the applicant should visit www.mytransunion.co.za.

'We are,' said van Alphen, 'hearing rumours that certain paid up credit accounts, which were formally in arrears, are still listed by the Credit Bureau. However, the credit bureaux have been given just two more months to de-list any such accounts and after that there should be no further trouble in this respect.'

A second major reason for declines (in 25% of cases) is affordability. In these cases the banks simply do not accept that the applicant's income justifies him for the loan he wants.

'Here,' said van Alphen, 'the clients themselves may be to blame because they have failed to reveal the full extent of their commitments, which are often payable monthly. We find on examining their bank accounts that they have simply forgotten to reveal such regular salary deductions as their life, health, pension and insurance payments, retail accounts, cell phone accounts, credit cards, hire purchase deals and personal loans.'

When applicants hold back on these details, said van Alphen, it may simply be because they lack clerical skills or have forgotten certain items. Alternatively they may be hoping that the credit bureaux may not pick up information of this kind. This is very unlikely as the efficiency of the bureaux is widely known.

A third reason for the rejection of loan applications, said van Alphen, is what is known as 'poor account conduct'. This covers certain internal banking matters such as RD cheques, unauthorised overdrafts and an abuse of any kind of the banking system.

A fourth reason for rejections may be that the banks view the property as overpriced - i.e. not sufficiently valuable to justify the loan for which the applicant has asked. This, however, happens very seldom, probably in less than one percent of rejections.

Rawson Finance Press Release



Gareth Shepperson
Commercial and Property Attorney

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