Regulations: Home Loans and Mortgage Disclosure Act

HOUSING PORTFOLIO COMMITTEE
21 February 2007
REGULATIONS: HOME LOANS AND MORTGAGE DISCLOSURE ACT

Chairperson: Ms Z Kota (ANC)

Documents handed out:
Department presentation on Regulations on Home Loans and Mortgage Disclosure Act

Other relevant documents:
Draft Regulations in terms of the Home Loans and Mortgage Disclosure Act
Investbank submission on Regulations Home Loans and Mortgage Disclosure Act
Afrec submission on Regulations on Home Loans and Mortgage Disclosure Act
Banking Association of South Africa submission on Regulations
FinMark submission on Regulations

SUMMARY
The Committee was briefed on the Regulations on the Home Loans and Mortgage Disclosure Act. The Department had a pertinent and specific interest in ensuring optimal provision of housing finance. The Office of Disclosure had been established in terms of the Act to achieve this goal. The final draft of the regulations would be submitted to the State Law Advisers by the end of February 2007. The regulations would be ready for the Minister's approval by mid March 2007. Enforcement of the Act and Regulations would commence at the beginning of the 2007/08 financial year.

Members' questions included the following:
- Would not financial institutions see the regulations as a form of duplication as there were already the Financial Sector Charter, the National Credit Act and proposed regulations under the credit legislation.
- What communication strategy was the Department using to ensure that the public knew about the existence of the Office and could report problems to it.
- Why financial institutions took into account the municipality's ability to enforce the collection of municipal service fees when it considered a loan application for a house situated there.

MINUTES
The Chair welcomed the Department to the meeting. Mr M Dlabantu (Deputy Director General), Mr Gaza Phoku (Director: Office of Disclosure) and Mr Richard Thatcher (Director: Legal Services) attended the meeting. Mr Dlabantu briefed the Committee on the regulations (see document attached). He said that the regulatory environment had changed significantly since the enactment of the Act. The consultation process on the regulations commenced in 2002. The regulations had been gazetted for public comment on the 24 November 2006.

Discussion
Mr D Mabena (ANC) felt that the presentation merely provided information. He felt that there was nothing to deliberate upon.

The Chair said that this process was long overdue. She invited members to pose questions for clarity on the presentation.

Mr G Schneemann (ANC) agreed with the comments by Mr Mabena. He noted that the presentation provided that a final draft would be presented to the State Law Advisers by the end of February 2007. He asked if this referred to a redraft of the legislation or regulations.

Mr Dlabantu replied that reference was to the regulations and not the Act.

A member asked the Department to expand on the definition of "exposure".

Mr Dlabantu relied that "exposure" was related to risk exposure.

Mr A Steyn (DA) asked if the Department had the capacity to enforce the regulations.

Mr Dlabantu replied that there had been only one person in the section concerned but this had since changed. There were four or five people in terms of the new organogram. There would definitely be capacity in the coming financial year.

Mr Schneemann noted that the enforcement of the Act and regulations would commence at the beginning of the 2007/08 financial year. He asked the Department to assure the Committee that this would happen.

The Chair agreed that the regulations had been on the table for some time. The Committee wanted to be assured that they would be enforced.

Mr Dlabantu replied that there were five officials in the Office and the intention was to reach twelve to ensure that there was effective enforcement of the regulations.

Mr Schneemann said that there was no deadline given for the appointment of the board. He asked what would be the impact on the operations of the Office of Disclosures if the board was not appointed by 1 April 2007. Would the functionality of the Office be delayed? He also asked how the Department envisaged the Office keeping Parliament (Portfolio Committee) updated on what kind of information had been received.

Mr Dlabantu replied that a delay of a day or two would not have a great impact on the operations of the Office. He was confident that the Minister would make the necessary appointments in time. Parliament would be briefed from time to time on its activities.

Mr Steyn said that institutions would have to report quarterly to the Office. He asked if any historical data would be supplied to the Office. Would the impact of the legislation only be felt as from the beginning of April?

A Member noted that a loan application could be declined on the basis that the municipality in which the house was situated was unable to enforce the collection of municipal service fees. She asked the Department to elaborate on this.

Mr Dlabantu replied that the ability of a municipality to collect service fees was relevant in assessing the risk that the institution would be exposed to and thus the value of the collateral that needed to be given by the applicant.

A committee member said that the presentation indicated that the regulatory environment had changed significantly since the enactment of the Act. He asked if financial institutions would not see the regulations as a form of duplication given that there was already the Financial Sector Charter, the National Credit Act and proposed regulations under the credit legislation. The Act specifically provided for amounts/fines that could be paid by an offender. The regulations were silent on this aspect.

Mr Thatcher replied that the Department had considered the regulations of the National Credit Act. He agreed that there might be duplications but said that the Department was negotiating with financial institutions to ensure that their work was not duplicated. The Department would try and align its reporting to that required by the Department of Trade Industry.

The Chair asked what communication strategy the Department was using to ensure that the public knew about the existence of the Office and could report problems to it. She was concerned that financial institutions would be able to decline loan applications based on the inability of a municipality to collect service fees. The Act was meant to address issues of access to loans and it seemed that the regulations would not solve the problem.

Mr Phoku replied that the Department would have links with provinces and municipalities. It would establish help desks in some municipalities. There was also the Public Information Terminal that was rolled out by the Department of Communications and the South Africa Post Office. The Department would have a slot through which members of the public could e-mail their concerns to the Office of Disclosures.

The Chair thanked the Department for the presentation and asked the Committee to proceed to the adoption of its minutes of a previous sitting.

The meeting was adjourned.