Your joint mortgage may form part of your partner’s debt review without your consent.
However, what about situations where you are married out of community of property, are divorced or where you have taken a joint mortgage with a friend or relative? If the other party to the joint mortgage is placed under debt review, what rights do you have?
In theory a debt counsellor is supposed to inform the other bond-holder about the debt review application of their client. This is according to Ms Nthupang Magolego, Senior Legal Advisor at the National Credit Regulator who says, “This notification will give the consumer who has not applied for debt review an opportunity to consider various options that may be available. The consumer who has not applied for debt review will not be flagged at the credit bureaus.”
However, this does not appear to be happening in practice as a reader discovered when her ex-partner put himself under voluntary debt review. “He signed over his power of attorney to a debt counselling company and renegotiated our monthly home loan repayments without him or the debt counsellor telling me. I found out by accident as the home loan repayments come off my ex’s account each month by debit order.”
She asked for the home loan to be removed from the debt review, but neither her ex nor the debt counsellor was willing to do so. The bank also refused to remove the joint home loan from the debt review process and the incident turned into a blame game, with the bank blaming the debt counselling company for applying for debt review on a joint home loan without both parties’ consent and the debt counselling company blaming the bank for not informing them it was a joint home loan when the bank sent through the Certificate of Balance (CoB).
Who is responsible for what?
So, what actually should have happened? Who is responsible for what, and what are the rights of the reader in this regard?
According to Paul Slot, head of the Debt Counsellors Association of South Africa (DCASA), the issue of how to handle joint mortgages under debt review is not clearly defined in the National Credit Act, hence the confusion over the process. “Joint mortgages are not catered for in the National Credit Act and so the issue is very problematic. This topic has been under discussion for the last 10 years at the Credit Industry Forum set up by the NCR.”
According to Slot’s understanding of the law, the onus is on the bank, not the debt counsellor, to inform the client. “The debt counsellor does not need to obtain the consent of the non-debt-review partner as the debt counsellor has no legal relationship with the non-debt-review consumer. It is the client under debt review who is responsible for supplying the financial information and payment commitment from the non-debt-review party. On the other hand, the credit provider (bank) has a legal relationship with both consumers and they should therefore inform both parties of the debt review application, but they don’t always do this.”
Although the joint mortgage can form part of the debt review process without the consent of the partner, if the partner is not over indebted, he/she cannot be included in the debt review process and it should not affect the partner’s credit record.
How the process works
Slot explains how the process currently works:
- If a consumer applies for debt review and a joint mortgage is present, the bank will notify the debt counsellor on the Certificate of Balance (COB) that the mortgage is a joint mortgage.
- If the bond-holder who is not under debt review is not over-indebted, that person would not form part of the debt review, unless they are married in community of property.
- If the bond is paid in full by the non-debt-review party, then the bond can be excluded from the debt review process.
- In other situations, the debt counsellor should request the debt review applicant to obtain the non-debt-review consumer’s financial commitment to pay the bond (this may include details of income and expenditure) and that payment should be made directly the bank.
- No credit provider or debt counsellor has the statutory power to remove a bond from debt review unless the non-debt-review partner has been paying 100% of the bond.
Considering this legal minefield, if you are going to enter into a joint home loan, make sure you have a separate agreement as to what happens if one of you can no longer pay or are put under debt review.
This article first appeared in City Press.