People can’t settle mortgage debt

Despite projections of economic growth, access to affordable housing remains a great challenge for Namibia with a number of people not paying off their mortgage debts.
Figures from First National Bank indicate that towards the end of 2011, the total individual mortgage loans which were outstanding for the whole financial sector were at N$18.5 billion.
“Representing 20% of gross domestic product (GDP) at the end of November 2011. These are the main lending instruments of banking institutions in Namibia,” said senior manager of research and development at FNB, Daniel Motinga.
Even though the economy is projected to grow (between 4% and 4.2% in 2012 based on the estimated 3.8 % GDP growth of 2011- according to the Development Bank of Namibia, consumers’ decision to walk away from settling debt usually leads to possible repossession of homes.
But Dawn Humphries, communication officer at FNB, said that the bank only repossesses a house once all other avenues have been exhausted.
A debtor in default of payments is contacted telephonically and in writing, advising him or her that the account is in arrears and to negotiate terms for repayment. Should these measures not elicit a favourable response or action from the customer the bank has no other alternative but to resort to the legal process to recover money owed.”
Furthermore, the bank instructs an attorney to issue a letter of demand, followed by a summons, judgement and attachment of property. The customer is also offered the chance to intervene in the legal procedures.
“If the bank has suffered no loss and the customer’s credit profile has been restored the bank will consider doing business with the customer again through the normal channels of application and assessment,” Humphries said.
According to research findings of a study on housing delivery in Namibia by Els Sweeny-Bindels, associate researcher at the Institute for Public Policy Research, only about 5.7 % of the population is financed by the banks, usually in the income range of more than N$10 500.
In the meantime, Humphries said that the bank undertakes public education initiatives to inform bank clients and educate customers about their rights and the way in which business is conducted.
“FNB is well aware of the fact that most town and cities are in the unfortunate situation where the demand for housing outstrips supply, especially the supply of low cost housing of which there is an acute shortage. Coupled to this is also the fact that banks have had to become much stricter about lending criteria in order to protect them and their customers,” she added.
According to the ‘Namibia Macro-economic Outlook 2011/2012’ report by Investment House Namibia, local banks have lowered their home loan rates by less than their prime rates since mid-2009. This was done to protect interest rate margins and profitability during the period of falling interest rates, with home loans accounting for the majority of loans.
“We expect this practice will continue over the medium term with the home loan rates of Bank Windhoek, First National Bank of Namibia and Standard Bank Namibia increasing to 11.25% and 12.75% in 2011 and 2012, respectively,” reads the report.