Cape Town couple lay fraud charges against First National Bank over home repossession attempt
The basis of the fraud charge is that the bank attempted to repossess their home when it was not in fact the legal owner of the mortgage loan, and then supplied documents to the Deeds office without the home owners' consent.
In a ground-breaking decision for embattled home owners, Judge Moosa in the Cape High Court in 2008 refused FNB’s application for summary judgment against the Cape Town-based home owner, Zulfa Samsodien, on the basis that the bank could not show it had any legal standing in the matter.
This is because the home loan had been securitised – a process whereby banks bundle loans together and on-sell them to third parties. They are then traded for profit on the stock exchange. In this case, Mrs Samsodien's home loan had been ceded to a company called Ikhaya. Securitisation has become a hugely controversial issue in South Africa and around the world, as home owners are starting to challenge banks attempting to foreclose on the grounds that they no longer have legal title to the loan.
“After the first judgment in 2008, a second judgment was brought against Zulfa in 2010,” says Ahdill Abrahams, Zulfa Samsodien’s husband. “Thereafter we were granted a court order to go under debt review. In 2012, Zulfa was served with a notice for Sequestration, even though we were in full compliance with the debt review order. I was sequestrated in January 2013 and immediately made application for an appeal. We are still waiting for a date for the appeal hearing.”
Mr Abrahams says the couple – who recently appeared in an SABC documentary on securitisation entitled Who Owns Your Debt – decided to lay fraud charges for the simple reason that the law was broken. “The reason for the fraud charges is that Ikhaya and FNB are unlawfully acting outside the legal framework of the Banks Act of 1990 and the National Credit Act. They are subject to the laws just like everyone else. Nobody is or should be above the law.”
Mr Abrahams says the couple were surprised and shocked when they received summons in 2008 from Ikhaya, a company they had never heard of before. "Our loan was with FNB, so we had no idea how Ikhaya came into the picture. Only later did we learn about securitisation, and it became clear that our home loan had been sold to another party."
The banks are starting to feel heat from borrowers over the issue of securitisation, following a series of documentaries by SABC and an ongoing educational campaign by public pressure groups such as New Economic Rights Alliance. Banks have been forced by US courts to pay multi-billion dollar settlements to borrowers over fraudulent or wrongful repossessions due to securitisation.
Mr Abrahams says he wants the law enforcement authorities to fully investigate the wrongdoing by FNB and Ikhaya, and then the lay charges against the individuals involved in the bank.
Robyn Zimmerman, the attorney representing the couple, says when she investigated the matter, she found inconsistencies in FNB’s application for sequestration. The bank claimed it had ceded its rights in the loan agreement to Ikhaya on 14 December 2007, but investigation at the Deeds office show this occurred on 30 October 2007. The bank therefore “failed to draw the court into its confidence by stating the date when the actual cession occurred,” says Mrs Zimmerman.
“I further filed a complaint for investigation with the National Credit Regulator (NCR) to confirm the date that Ikhaya RMBS 2 Limited became a registered credit provider. The NCR responded and confirmed the date of registration as 24 January 2008.
“The reason this is significant is that at date of the cession, Ikhaya was not a registered credit provider, nor was its application for such registration made within 30 days of acquiring the loan by virtue of its cession.”
This means that Ikhaya cannot claim any interest on the loan from the date of the cession. “FNB cannot later come and claim the interest portion from her as they sold their right, title and interest to the loan in its entirety to Ikhaya and received value for this. There are other legal aspects of unjustified enrichment which we feel are in her favour,” says Mrs Zimmerman.
It also means Mrs Samsodien may not owe the bank anything, and would therefore not be in arrears, which would then be grounds for having the sequestration overturned.
The couple say they have been put through several years of hell over this matter, and now they want justice.
Mrs Zimmerman says for other couples facing similar circumstances, this case could prove to be a vital precedent. “The rule of law is there for a reason. It appears that the banks have contracted, in cases such as this, outside the rule of law and continue to conceal the whereabouts of the loan and the owner of the loan from its consumers. As such I feel it may qualify as a fraudulent transaction in terms of the Consumer Protection Act, Section 42.”
Several cases have come to light of banks attempting to foreclose on defaulting home owners, but when asked to present the original mortgage loan agreements, they claim they have been destroyed in a fire, or otherwise lost. Rules of evidence require original documents to be presented before a court, but judges have in many instances waived this obligation when it comes to the banks.
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