How to defend your home against bank foreclosure
When you fall into arrears on your bond, this indicates that your financial affairs are in a desperate state. So I would urge you to read my previous article on how to free yourself from debt slavery by way of background. No matter how dire your circumstances, there’s only one way to free yourself from debt bondage and that is to stop paying unaffordable debt. This article is based on years of hard-won experience in fighting the banks in our courts. I have annotated the article to show the relevant statutes and case law. Note, I have not argued securitisation in this article - I am saving that for a later article.
Your four courses of action in bond foreclosure
There are four possible plans of action on bond foreclosure:.
A. Reinstate your bond in terms of Section 129(3) of the National Credit Act (NCA), which you can do once you catch up on your arrears. But for many people, this is simply impossible.
B. Let the bank take judgment against you, in which case the property will be sold at the sheriff’s auction (usually for a fraction of its worth). This has to be one of the sickest travesties of our justice system. This is because our court rules allow these auctions to take place without a reserve price, which means your cherished house could sell for R100 (and don’t believe this hasn’t happened). You can prevent this from happening by taking certain steps as I outline below.
C. Sell your property on the open market to get the best possible price. Here you would get an estate agent to put the house on the market and sell at a fair market price.
D. Take legal steps to defend the bank’s action to foreclose on your property. Bear in mind that there are costs associated with defending in the High Court (which I would argue is a violation of your rights of access to justice in terms of the Constitution, and you should raise this in your defence). Do It Yourself (DIY) Defence is quick, free and easy to do. People have a natural fear of lawyers and courts, but you need to lose that fear. You can defend yourself at no cost. Your main objective in mounting a defence is to get past the summary judgment stage (which is argued on paper) and have the matter referred to trial – which gives you a year or two to either settle with the bank or take further legal steps.
Defending the bank's summons against you
The rest of this article assumes that you are way past the point of settling with the bank and need to defend against any legal action it might take. That being the case, let's proceed. Those of you who have been following my articles will know that banks have been deceiving the courts by foreclosing on South Africans without the original loan agreements, claiming they were destroyed in a fire. The good news is that the courts are getting tired of this rubbish. And we all know that these documents "destroyed" in fires conveniently hide the banks' securitisation activities (where mortgage loans are bundled together and on-sold to investors - in which case the bank no longer has legal title). But that's another story.
Some points to consider in defending against the bond foreclosure:
Keep written records
- Keep written records of all emails, correspondence and documents relating to the bank (before, during and after the legal defence is entered). This is vital to your ability to win. Greg Smith successfully defended himself against the bank because he kept all his records of correspondence and acquired a decent knowledge of the law. You will need these records in defending yourself, and you should attach them to your affidavit when you defend.
- Once the bank institutes legal action against you, it is too late to consider debt review proceedings (which I am opposed to anyway, since debt review will keep you trapped in debt slavery). At this point you must give notice of your intention to defend the action. Even if you feel guilty because you fell into default on your mortgage bond, you have legal rights and I will show you how the banks are violating these rights. Stay with me, as I guide you through this process.
- Set your defence up correctly from the beginning, which is when you are served with the Section 129 notice (required under the National Credit Act), which notifies you of the bank’s intention to launch legal proceedings unless you pay the money owed. But even if you did not respond to the Section 129 notice, you need to defend using one or more of my points below.
These are some of the grounds in short which you can use to oppose bond foreclosure proceedings against you or to lay complaints under section 129 on the National Credit Regulator website.
Loan agreement not attached to summons
1. The bank’s summons will refer to a loan agreement which will in all likelihood not be attached. This is in violation of Rule 18(6) of the High Court. The bank bears the onus of proving the terms of agreement which it cannot do without attaching the agreement (which therefore gives you grounds to deny the terms of agreement in your replying affidavit). Once you receive summons you must immediately give notice of your intention to defend. You can download a template for your notice of intention to defend here.
Denial of access to justice
2. Presumably, if you can't afford to pay your bond, you can't afford an attorney to defend the action because the banks usually institute action in the High Court where the legal costs of attorneys and advocates are unaffordable. You must argue in your replying affidavit (to the bank’s summons) that this limits your access to justice in terms of the Constitution. You should state in your defence that the high costs of appearing in the High Court limit this right, and ask the judge to refer the matter to the Magistrates’ Court (where costs are much more affordable.). It is a denial of justice to sue you in the High Court when the National Credit Act provides that the Magistrate Court has jurisdiction over bond foreclosure proceedings!
Challenge the bank's deponent
3. Check who signs the bank's summary judgment affidavit and what documents they checked or should have checked. This defence is particularly relevant when the bank fails to attach the loan agreement to its papers. Here's an article that covers how to argue this point.
Pulling apart the bank's certificate of balance
4. The bank’s summons will include a “certificate of balance” which is an unverified claim of the amount it alleges you owe. In most cases I have seen, there are grounds to challenge this certificate of balance which will get you past summary judgment (and therefore buy you time). Sometimes the loan agreement does not provide for a certificate of balance to prove the sum claimed. To check the sum claimed you must ask the bank for your bank statements, which it is required to provide free of charge in terms of section 110 of the National Credit Act. Highlight any mistakes on your account as these will affect the balance being claimed against you. Once you have obtained your bank statements, scrutinise these for disputed charges such as insurance, untaxed legal fees, admin fees and other charges that were not agreed to in the initial loan agreement. If you need help on this, sign up with DIYDefence here. These charges are more than often not allowed in terms of the loan agreement and may have altered your payment schedule either in respect of the instalment or the term of repayment. This is illegal without doing another assessment of your ability to afford the additional charges. If you can cast doubt on the accuracy of the outstanding balance that is claimed against you then you cast doubt on the certificate of balance as well. You may need a specialist to help on this, in which case contact DIYDefence.
Denial of right of access to housing
5. Also defend on the ground that the bank is denying your right of access to housing by taking the extreme measure of seeking a forced sale through sheriff’s auction. Argue that it has refused any attempt to negotiate or to allow you to catch up with your arrears. (Remember, you should have kept records of all your interactions with the bank and its attorneys, including your attempts to negotiate.) The courts do not like this, since banks are notorious – despite what they say to the contrary – for using our courts as their first port of call when it comes to dealing with customers in difficulty. Courts should be a last resort. The right of access to housing is protected by the Constitution, and is sadly not argued enough in our courts. Deal fully with your personal circumstances as set out in the case of ABSA BANK LTD v NTSANE AND ANOTHER 2007 (3) SA 554 (T) as to why you should not be deprived of your property. You could also argue that the bank’s summons does not contain the necessary allegations and information required by Rule 46 of the High Court to declare your property executable.
6. Reckless Lending: If the bank summonses you without attaching a true copy of the original loan agreement, they cannot prove that they did a proper credit assessment on you (even if they allege they did). This would be grounds for pleading reckless lending. Let’s say you have defaulted for two months and the bank decides to capitalise your arrears without doing a fresh credit assessment. This is also reckless lending.
That’s quite a bit of information, but absolutely necessary in defending this type of case. As far as possible use all the defences at your disposal. Follow this procedure and you have a good chance of successfully defending your case.
You can do this on your own, without expensive lawyers. Contact DIYDefence for more information on how to do this, or if you feel you need some assistance in mounting a legal defence against the bank.
The main point to bear in mind is that you can and should ALWAYS defend against a bank summons. You do not need to fear the courts. Many people have successfully defended themselves and won against the banks.
You can contact Armand Rinier at [email protected].
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