Securitisation/Cession Mortgage Bonds and Related Securities by the S A Banks.

Securitization is a USA term for Cession and really entails the financial practice of the pooling various types of contractual debt such as residential/commercial mortgages, motor vehicle loans or credit card debts (any other non-debt assets which generate repayments) and trading of their related cash flows to third party investors as securities, which may be described as bonds, fixed-income securities, or collateralised any structured asset-backed security (ABS). Investors are repaid from the principal and interest cash flows collected from the subject debt and is then redistributed through the capital structure (money multiplier) of financing. Securities backed by mortgage debts are called Mortgage-backed securities (MBS), and those backed by other types of debts are called Asset-backed securities (ABS). Off-balance sheet treatment for securitizations backed by the guarantees from the issuer can hide the extent of leverage of the securitizing firm, and in doing so, facilitate high risk capital structures that can lead the underpricing of credit risk.  Off-balance sheet securitizations played a large role in the high leverage level of U.S.A. financial institutions before the 2008 crises that required financial bailouts. The lack of information related to the pools of securitized assets can mitigate/increase the credit risk of individual borrowers. Unlike general Corporate debt the credit quality of securitized debt is constantly changing due to the volatility of the debts in the pool, that are time- and structure-dependent. If the transaction is properly structured and the pool performs as expected, the credit risk of all tranches of structured debt improves; if improperly structured, the affected tranches may experience dramatic credit deterioration and losses. Securitization has evolved from its beginnings in the late 18th century to many Trillions USA Dollars today. 

Cession:

The act of cession is the assignment of property to another entity. In International Law it commonly refers to land transferred by treaty. Ballantine's Law Dictionary defines cession as "a surrender; a giving up; a relinquishment of jurisdiction by a board in favor of another agency.” In contrast with annexation, where property is forcibly given up, cession is voluntary or at least apparently so.

 Why Cede/Securitise?

A leasing company may have provided R10m worth of leases, and it will receive a cash flow over the next five years from these. It cannot demand early repayment on the leases and so cannot get its money back early if required. If it could sell the rights to the cash flows from the leases to someone else, it could transform that income stream into a lump sum today (in effect, receiving today the present value of a future cash flow). Where the originator is a bank or other organization that must meet capital adequacy requirements, the structure is usually more complex because a separate company is set up to buy the assets. (Special Purpose Vehicle)Before we get into the "very complexities" of the process, I think we should make sure about the related definitions of some of the words to be used (just so that we are all on the same page).

Definitions:                                   

Securitization is a financial process whereby a fixed, or group of assets, and through financial engineering, are taken and transformed into a security document/Security. This can be described as a process by which groups of fixed/illiquid assets (usually debts) are packaged, bought, securitized and sold to investors.  

Investors/Issuer: The Issuer, is the person and/or Company (Entity) that purchase the pool of debts set aside for securitisation/cession.                                                                             

 The Seller: The Seller normally do business in, inter alia, the Origination of Property Loan Agreements linked to Mortgage Bonds registered on/over such properties. That includes residential as well as commercial properties.                                                            

Sales Agreement: The terms and parties to a Securitisation Sales Agreement, are always incorporated specifically, and expressly set/named, in the Sales Agreement.          

Loan Portfolio: The seller notifies the issuer in writing of an intended sale by supplying the Issuer with a detailed list of the securities that the seller wants to put up for sale. This constitutes an offer by the Seller. The Issuer is now entitled to acquire the Loan Agreements listed on the Loan Portfolio.

The Administrator: The Seller, unless otherwise contracted, stays the administrator of the Loan Agreements in the pool/tranche, Securitised/Ceded to the Issuer. Remember that Securitisation involves an Out-and-Out cession, meaning that the Seller cede ALL rights, ownership and custody.                                                                                                       

Pooling and transfer: The originator initially owns the assets engaged in the deal, and is typically an entity wanting to raise capital, restructure debt or adjust its finances.        

Special Purpose Vehicle (“SPV”): A portfolio of assets is "pooled" and transferred to an SPV formed for the specific purpose of funding the assets. When the assets are transferred to the issuer/SPV, there is normally no recourse to the originator.                              

Accounting Standards: Different accounting standards that govern when such a transfer is: We distinguish between a true sale, a financing, a partial sale or a part-sale and part-financing. In a true sale, the originator can remove the transferred assets from its balance sheet: In a financing, the assets are considered to remain the property of the originator.    

Capital raising: A company normally has the following options to raise net capital: Take out a loan, do a Bond issue, or issue shares/stock. Share/stock offerings increase the ownership and control of the company, Loan or bond financing is often too expensive due to the credit rating of the company and the associated possibility of interest rate fluctuation.

Custodian: A custodian is legally responsible for the safety and security of an item or a person. In financial terms, a custodian is the financial services company that maintains electronic records of financial assets or has physical possession of specific securities. The custodian's client may be another institution, such as a mutual fund, a corporation, or an individual.

Mortgage Bonds: “Mortgage Bond” means a bond attested by the registrar specially to pledge as security, without delivery of title or possession thereof, related/linked to a specific immovable property; When you buy a home and finances the purchase with a mortgage, the lender is entitled to sell the mortgage on the secondary market to another entity, such as an investment bank or Government sponsored enterprise (GSE). The GSE packages the mortgages with a pool of other loans, and issues bonds, with these pooled mortgages as backing. When homeowners make their mortgage payments, the interest portion of their payments is used to pay the yield on these mortgage bonds. If most of the homeowners in the mortgage pool keep up with their payments, a mortgage bond is a safe and reliable income-producing security. When the homeowner defaults on a mortgage repayment, the bondholders institute a claim on the value of the homeowner's property. In comparison, investors in corporate bonds have little to no recourse should the corporation default. It is important to know that a securitised Mortgage Bond has changed in ownership.                                  

Mortgage Bad Debts: Where Mortgage bonds normally represent a safe investment, the Worldwide financial crisis of the late 2000s, proved otherwise. Before the crash, investors earned bigger yields purchasing bonds secured by mortgages and offered it to buyers with poor credit or insecure income — while still enjoying the perceived security of investing in collateralised debts. What happened is that a huge amount of these subprime mortgages defaulted leading to a crisis, costing investors millions. Hence the increased scrutiny over such securities.                                                                                                                       

Money Laundering: Money Laundering is the process of concealing the origins of money obtained illegally by processing the ill-begotten money through a complex set of banking transfers to various accounts/institutions or commercial transactions. We can identify three steps in this laundering process: 1)Placement, Cash businesses –by adding the cash gained from crime to the legitimate takings. False invoicing – putting through dummy invoices, to look like payments in settlement of such invoices, Smurfing –depositing illegal money in small amounts to bank accounts or credit cards, then using these to pay expenses, Trusts and offshore companies – very useful vehicles used for hiding the identity of the real beneficial owners. Foreign bank accounts – physically taking small amounts of cash abroad and depositing same in foreign bank accounts. These are later sent back to the country of origin. Cancelled transactions – crime related funds are lodged with a lawyer or accountant, earmarked for a transaction. This transaction is aborted. Funds are repaid to the client from an unimpeachable source.       2)Layering, Layering is essentially the process of depositing and withdrawing of the crime money several times and at different financial institutions, using varying amounts each time, to make tracing transactions as hard as possible.                                  3) Integration / Extraction, This is the final stage when the money is extracted from the system, so it can be used without attention from the Law Enforcement Agencies. Criminals are in this stage content to pay payroll and other taxes to make the “washing” more legitimate and are happy with a 40% to 50% “shrinkage” in the wash.                                                                                                                                           

Fraud: Fraud is generally defined in the law as an intentional misrepresentation of material existing fact made by one person to another with knowledge of its falsity and for the purpose of inducing the other person to act, and upon which the other person relies with resulting injury or damage. Fraud may also be made by an omission or purposeful failure to state material facts, which nondisclosure makes other statements misleading.                      

Racketeering: The Prevention of Organised Crime Act (POCA), no. 121 of 1998 (With Amendments), describes Racketeering as: A person/group/gang is guilty of a racketeering offence if they have any property which they know is linked or used to commit and/or further any illegal business activity. If a court finds that the person ought reasonably to have known that their property was being used in illegal activities, then that person is also considered guilty of a crime. This means that ignorance is not an excuse.  What Is the Punishment for Racketeering? The punishment for racketeering-related crimes can be high. Any person convicted of racketeering can get fined for up to R1 000 million or be imprisoned for life. If a regional court thinks that a criminal ought to be fined for more that R100 million, or be imprisoned for more than 30 years, then the court will stop proceedings and hand the case over to the High Court. What is a Gang-Related Crime? You can be found guilty of a crime if you: willfully aid any criminal activity carried out by a criminal gang; threaten to commit any act of violence by a criminal gang; threaten any person or persons with retaliation in response to an act or alleged act of violence; perform any act that contributes to a pattern of criminal gang activity; incite or encourage any other person to take part in criminal gang activity; or intentionally cause or encourage another person to join a criminal gang. 

Some useful Latin phrases:

In pari delictum: This is a Latin phrase for "in equal fault” and is a legal term used to indicate that two persons or entities are equally at fault. The phrase is most commonly used by Courts when relief is being denied to both parties in a civil action because of wrongdoing by both parties. The phrase means that since both parties are equally at fault, the Court will not involve itself in resolving one side's claim over the other and is like the defense called: “Unclean hands”, meaning that both are equitable defenses.                                      

 Locus Standi: Locus Standi means the right of a party to : i) appear and be heard before a court of a law, and institute a suit or an action before the Court. Locus standi, in legal terms basically refers to the ability of a party to show to the Court that there exists enough connection or nexus or cause of action to the party, from the suit.                                        

In Limine: A motion filed by a party to a legal proceeding asking the Court for an order limiting the other party from presenting certain evidence. A motion in limine is usually made before a trial begins. It is a request to the Court to prohibit the other side from presenting, or referring to an evidence which is highly prejudicial, irrelevant, or inadmissible . An in limine motion is made outside the hearing of the jury. It can be taken in an open Court, or in a Judge’s chamber. If the probative value of an evidence is outweighed by its prejudicial value, the Judge will agree with the request in the in limine motion. The evidence excluded by an in limine motion would be prohibited from being presented without specific approval from the Judge, at the time the party wants to offer the evidence. The violation of a motion in limine results in the declaration of mistrial.                                                                                

Some South African Acts that might be mentioned.                                           

The Financial Intelligence Centre Act (38 of 2001) (the FIC Act):

"The FIC Act came into effect on the 1st of July 2003. The FIC Act was introduced to fight financial crime, such as money laundering, tax evasion, and terrorist financing activities. The FIC Act brings South Africa in line with similar legislation in other countries designed to reveal the movement of monies derived from unlawful activities and thereby curbing money laundering and other criminal activities. An important section of the FIC Act is the Obligation to keep transaction: 1) Financial records: accountable institution must keep a record of every transaction (for 5 years after ending the relationship with such client), whether the transaction is a single transaction or concluded in the course of a business relationship which that accountable institution has with the client, that are reasonably necessary to enable that transaction to be readily reconstructed. (2) Without limiting subsection (1), records must reflect the following information: (a) The amount involved and the currency in which it was denominated; (b) the date on which the transaction was concluded; (c) the parties to the transaction; (d) the nature of the transaction; (e) business correspondence; and (f) if an accountable institution provides account facilities to its clients, the identifying particulars of all accounts and the account files at the accountable institution that are related to the transaction. The duties imposed by sections 22 and 22A on an accountable institution to keep a record of the matters specified in those sections may be performed by a third party on behalf of the accountable institution as long as the accountable institution has free and easy access to the records and the records are readily available to the Centre and the relevant supervisory body for the purposes of performing its functions in terms of this Act.  If a third party referred to in subsection (1) fails to properly comply with the requirements of sections 22 and 22A on behalf of the accountable institution concerned, the accountable institution is liable for that failure.”                                                                                      

The Prevention of Organised Crime Act (POCA), no. 121 of 1998.

The POCA was enacted to, amongst others, introduce measures to combat organised crime such as money laundering and racketeering activities; Provide for the recovery of the proceeds of unlawful activity; Provide for the civil forfeiture of property that has been used to commit an offence; To prescribe penalties for those found guilty of committing offences in terms of the Act.

National Credit Act (N C Act 34 of 2005): The National Credit Act (the Act) has as its aim, the transformation the South African credit market. All credit providers are required to comply with the NCA.                                                                                                           

The NCA applies to all credit agreements in SA, involving: 1). individuals, except transactions: a) at arm’s length (loans between family members, partners and friends on an informal basis will not be regulated); and b) between a stokvel, and a member of that stokvel; c) juristic persons (businesses) with an asset value or annual turnover of less than R1m, but not if such a juristic person enters into an agreement amounting to more than R250 000.  

A credit transaction is characterised by, firstly, there must be some deferral of repayment, or a prepayment. Secondly, the credit provider must impose a fee, charge or interest with respect to deferred payments.

Enforcement of the Act rests with the National Credit Regulator.  The National Consumer Tribunal will adjudicate on a wide variety of applications and conduct hearings into complaints under the Act. If a Court finds that an agreement was reckless it may suspend the agreement. A suspended agreement remains in force but cannot be enforced until the consumer is able to afford it.                                                                                             

Deeds Registration Act (Act 47 of 1937):  Deeds registration is a land management system whereby all important instruments which relate to the common law title to parcels of land are registered on a government-maintained register. Deeds registration systems were set up to facilitate the transfer of title.

Promotion of Access to Information Act (Act 2 of 2002):

The Promotion of Access to Information Act, 2000 is a freedom of information law in South Africa. It gives effect to the constitutional right of access to any information held by the State, and any information held by private bodies that is required for the exercise and protection of any rights and a fair trial.

Some S A Court cases that might be mentioned:        

1) Home Obligors Mortgage Enhanced Securities (PTY) Ltd. vs Louw and Another (5545/2112) {2016} ZAKZPHC 44 (30 May 2016),                                                          

2) Absa vs Moore (2017).

CHAPTER 3.                                                                                                                               My investigations into this subject started when I was mandated by a client (“Mr. X”) of a major Bank (For the purpose of this article, and to prevent any undue exposure of the subject Bank before the finalisation of the, at present “sub judice”, Court case, we will call the Bank “Bank A”) to investigate his Home Loan account and related securities. Mr. X was charged/sued for non-payment of his Bond account monthly instalments.

Mr. X believed he owed Bank A nothing as his Home Loan, Mortgage Bond and related securities were securitised by Bank A and that the Issuer paid Bank A the full outstanding amount of his Bond Account held by Bank A. Mr. X further alleged that Bank A had no locus standi to sue him for arrears payments as Bank A ceded all rights and obligations linked to his Home Loan Account to the Issuer.

Under normal circumstances, Bank A would own the house of Mr. X until fully paid for and ownership/Title will thereafter be registered in the name of Mr. X by the Registrar. Mr. X will then hold full title of the subject property. The asset will then also be taken off the Balance Sheet of Bank A as it had been fully paid for.

Mr. X argues in this case that the house he financed through Bank A was fully paid for by the Issuer and that he (Mr. X) does not owe Bank A any money. The house of Mr. X was allegedly fully paid for and no more recorded on the Balance Sheet of Bank A.

There were certain indications that led us to believe that the Home Loan and Related Securities linked to the Home Loan of Mr. X were ceded/securitised to the Issuer. These indicators/codes have yet been explained by Bank. All employees of Bank A, and everybody in the know, including the Legal Division of Bank A, have been mum on an explanation, and/or relevance of certain codes appearing on the Quarterly Home Loan Bank Statements of Mr. X. (Codes such as: Csp002ml/2008). These may be indications to establish a suspicion that your Home Loan and related securities could have been securitised by your Bank (In this case Bank A)?

We suspect, now, and until the relevant people will be subpoenaed to Court to give evidence, that there are certain codes appearing at the bottom of your Home Loan Statement, that might be an indication that your Home Loan and Related Securities have been securitised. These codes differ from Bank to Bank and each case will have to be taken/investigated on its merits. The Banks are not legally entitled to Securitise/cede you Home Loan and Related Securities, without your written permission. After the National Credit Act was changed in 2008, the Banks slipped a clause into the Home Loan Agreements whereby the signatory of the Agreement consent to the securitisation of the Home Loan Agreement and Related Securities. This can be scrapped or accepted by the client on signing the Agreement. BUT the Banks never explain to the clients what they are letting themselves in for.

Findings: 

We have established that the Sales Agreement between Bank A and the Issuer (signed on 14 August 2007), stipulates as follows:                                                                           

1.1) “The sale and purchase of every Loan Agreement, in the relevant Loan Portfolio, in terms of clause 3 of this agreement, shall be subject to the terms of this agreement, and shall include, with effect from the relevant Transfer Date, a cession by the Seller (Bank A) to the Issuer, all its right, title, interest and benefit in and to it…..” 

 1.2) “all the right, title, interest and benefit of the Seller (both present and future) to each Loan and Related Security, including all right, title, interest and benefit of the Seller (both present and future) in and to the Mortgage Bond.

 1.3) all rights to sue on all undertakings and obligations in favour of the Seller in each Loan Agreement and Related Security, the right to exercise all powers of the Seller in relation to each Loan Agreement and Related Security and the right to exercise any right of any action against any Accredited Attorney, Accredited Valuer or any person in connection with a Loan Agreement and Related Security.

1.4) All rights to receive payments of principal and interest and all sums due on each Loan Agreement and the Related Security.                                                                                     

1.5) ALL other right, interest and benefit of the Seller (both present and future) in relation to each Loan Agreement and Related Security. 

Clause 3 reads, inter alia,” Prior to the intended sale and transfer by the Seller of Loan Agreements to the Issuer from time to time, the Seller (Bank A) shall notify the Issuer in writing of such an intended sale and furnish the Issuer with a list …..”                     

Clause 3.12 reads:” It is the intention of the parties to this Agreement that each sale and transfer of Loans by the Seller (Bank A) to the Issuer pursuant to this Agreement shall constitute an absolute sale and transfer and not a loan.

Clause 8.9.1 of the Sales Agreement between Bank A and the Issuer reads: “the seller shall not have any liability or responsibility (whether in either case, contractual, delictual or otherwise, expressed or implied) for or in respect of any loss or damage suffered by the Issuer resulting from or arising out of any breach by the Borrower (Mr. X) of any of the obligations in respect of any Loan or provider of Related Security in respect of any breach of such Related Security in respect of any breach of Related Security ….” Clause 16.1.1) The Seller (shall) notify its shareholders of, or obtaining the consent of its shareholders for, the conclusion of this Agreement and the Transaction Documents to which it is a party in the manner required under the Listing Requirements of the JSE Securities Exchange South Africa, …”

It is thus clear from the stipulations of the Sales Agreement between Bank A and the Issuer, that all right, obligation, and title to your Home Loan and Related Securities, are SOLD to an outside investor. These investments are normally ring-fenced, meaning that that the money allocated for a particular purpose (buying your Home Loan and Related Securities) will not be spent on anything else. If your Home Loan Agreement and Related Securities are securitised/ceded, it is all paid for.

Realistically speaking, you don’t have to pay Bank A anymore because they sold your Home Loan Agreement and Related Securities to the Issuer. So, who owns your house/property now? The Issuer, who can cede your Agreement and Related Securities to someone else again, who then becomes the owner of your house/property. . . He who holds the Title.

                                                               BUT

From its actions, Bank A seems to be the Administrator for the Issuer, in that Bank A issues quarterly Home Loan statements of account to the borrowers (Liker Mr. X). Bank A collects payments from Mr. X and now also wants to sue Mr. X for arrears payments.

They manage financial-related tasks for the Issuer. They maintain separate accounts and maintain accurate financial records. In the legal recovery process the Administrator has no locus standi.

Let’s look at the Legal facts to our disposal:

1) Documents lodged at the Deeds Office The different conveyancing lawyers involved with the property must liaise with each other to ensure that all documents are lodged simultaneously at the Deeds Office: 1)Transfer  document, 2) Bond registration, 3) Bond cancellation documents.                                                                                               The costs relating to the transfer of fixed property fall into three main categories: 

1)Transfer duty, which is payable to the State (roughly 5.8 percent of purchase price where the purchaser is an individual, and 10 percent where the purchaser is a corporate entity).  2) A portion of the rates payable on the property, as determined by the relevant local authority.                                                                                                                                  3) The conveyancer’s fee, which is calculated on a sliding scale based on the purchase price; for example where the price is R100 000 the fee will be approximately 1.5 percent.

2) Property is registered

1) The conveyancer will lodge the documents that he has prepared for registration in the Deeds Office. The Deeds Office is a government registry of all fixed property and rights in fixed property. If there is a bond to be registered the bond attorney will lodge the bond documents in the Deeds Office for registration simultaneously with the transfer documents.

2) The examiners in the deeds office scrutinise the documents to ensure that they comply with all relevant legislation and regulations. When they are satisfied, they inform the conveyancer that the transaction is ready for registration and thereupon, in the presence of the conveyancer and the Registrar of Deeds, the property is registered in the name of the purchaser. The bond is registered simultaneously.

3) Purchase price paid to seller

The parties will be given final accounts reflecting the final adjustments on, for example, rates, levies and occupational rent.

4) Title deed released

Registration renders the purchaser the registered owner of the property and his real rights are thus protected against third parties. All financial arrangements are usually finalised within 24 hours of registration. This entails the payment of guarantees by the purchaser’s financial institution, payment of the amount of the cancellation figure to the existing bondholder, payment of the balance purchase price to the seller and the settling of accounts with all parties.

Suspected fraudulent activities by the Banks:

1. Sale transaction: When the Mortgage Loan Agreement is sold, it must be endorsed as such by the Registrar. The endorsement involves some writing on the original document and most certainly some kind of an official stamp. When the Bank want to foreclose on your property, for non-payment of the contracted installments, the defendant (you) insist that the Plaintiff bring to Court the original Mortgage Loan Agreement and Related Securities. If Securitised, the Banks cannot do this because whatever is with the Registrar has been endorsed and that endorsement indicates that ownership of your property has been given/sold to somebody else.

      (THUS, the Docufile fires and all kind of excuses contrary to the FICA Act.)

1. This is an INTENTIONAL concealment of the facts and/or documents causing the Judges to make “Error of Law” decisions. Thankfully this has now changed: More Judges are now insisting on the originals resulting in the Banks withdrawing or settling the matters “Out-of-Court.
2. FICA Act (as discussed above on page 6):                                                               The Mortgage Loan Agreement is the Bank’s proof of the debt. In Court action instituted by a Bank, the unaltered originals must be presented (Rule 18.6). The Mortgage Bond is proof of the Bank’s security on the Mortgage Loan Agreement. In any Court action instituted by the Bank, the unaltered original must be produced and presented to Court.                                                                            
3. RULE: No Mortgage Loan Agreement – No Mortgaged Bond. ( Johannes Voet - Roman Dutch Law – Commentarius ad Pandectas). In the Pre-Industrial England and United States of America, there were two basic interests in property:                                

i) Equity Interest, signifying Ownership (Esq.).                                                                

ii) Security interests, signifying a debt, collateralised by the property. Security was considered documentation evidencing a secured interest in property, either specified or unspecified property belonging to a specified legal entity.

In the early 19Th Century, the concept of a security was extended to include documentation evidencing ownership of Shares in a limited liability corporation and certain types of, both debt and ownership interests in organised businesses.

In the 20Th Century, security was made more precise for legal and regulatory purposes.

In conclusion:

Securitisation encompasses the fabrication of rights in property (YOUR property) designed to yield maximum profits, bonusses, fees and compensation.

“It is a completely, entirely, and intentionally fixed game for which we, the people are paying.” (Quoted by H Dormehl). We have become mere gambling chips without freedom of choice, not because of a lack of freedom to contract, but for a lack of knowledge that was/is intentionally and actively concealed for the profit and gains of others, to end in the detriment of us, the people.

What to do if the Banks foreclose on your property:                                   

The Banks are very quick to foreclose on “your property” should you fall into arrears with your Bond repayments.                                                                                                                What are the minimum legal procedures they must follow to take possession of your mortgaged property should you, the mortgager, fails to keep up your mortgage payments?

1. Homeowners must be given the right to cure a default by catching up on missed payments, without penalty, at least 60 days before a mortgage holder demands immediate and full payment of the entire mortgage balance and before beginning any foreclosure proceedings. Now this sounds very simple and straight forward. Take careful note:                                                                                                                                     a) Mortgage Holder must take remedial/legal action,                                

      b) Claim the entire mortgage balance. (Keep this in the back of your mind, for now.)

Legal FORECLOSURE Proceedings:                                                                                Foreclosure is a legal process where the Bank as lender attempts to recover the balance of a loan from a borrower who is in arrears with the monthly payments. Civil legal action is taken against the “Bondholder” by forcing the sale of the house bonded. Therefore, through the process of foreclosure, the Banks/lenders seek to immediately terminate the bonded security and take both legal and equitable title to the property. Other lien holders can also foreclose the owner's right of redemption for other debts, such as for overdue taxes, sureties, etc.

The Bank/Lien holders must send you Letters of Demand wherein it is clearly recorded why the action is taken, (inter alia) what the outstanding balance is, what the amount of arrears is, time limits for rectification of the arrears situation. These letters are hand delivered at your last known address and/or send by e-mail. (E-mails are regarded as a “Supplementary method” only). This will be the start of the formal legal proceedings against your property and related securities.

The next step will be when an official Court Order / Summons is delivered to your last known address by the Sheriff of the Court. The Sheriff need to hand the Summons to you/the owner or anybody of legal age and get the recipient to sign for the receipt thereof. This will constitute a legal service of the Court Summons. The Court Summons is basically a notice informing you that Civil Proceedings are to be instituted against you for the recovery of the outstanding balance of your Home Loan and other costs related to the recovery process. The Summons will have a Court date recorded and steps that you must take to defend the matter should you wish to do so. It is now imperative that you consult with a trusted attorney and/or advocate to represent you or get legal aid.

Pre-Trial conference: The pre-trial conference is a meeting of the parties to the legal action and an endeavor to exchange relevant documents and to try and solve the matter without going to an official Court sitting.                                                                                             At this meeting you must insist that a Judge be the chairperson as all communications will then be recorded and will form part of the Court proceedings, should the matter go to Court.

You must:

1. Check your Quarterly Home Loans bank statement. Is there a code printed at the bottom of the statement? (e.g.: Csp002ml 01/2006 or any encoding) This code will be an indication that your Home Loan Agreement and Related Securities might  have been securitised by the Bank).
2. We know that Absa has in August 2007, securitised Home Loans and Related Securities, to Home Obligors Mortgage Enhanced Securities, in the amount of    R 3,342bn and that all rights and ownership related to those securitised, were relinquished in total (Out-and-Out cession).   
3. Deny that you owe the Bank any money (The Bank must prove it by way of a Sworn Affidavit and signed balance certificate, incorporated in the Sworn Affidavit).
4. Dispute the fact that the Bank has Locus Standi, in other words, that the Bank has the Legal capacity to sue you. If your Home Loan Agreement and Related securities have been securitised, the Bank is paid in full and they can not stand in Court saying that they suffer a loss or that they own your property. If securitised, it meant that your Home Loan Agreement and Related Securities have been ceded and all rights to it have been ceded to the investor and new owner of your Home Loan Agreement and Related Securities.
5. Insist that the Bank produce the original documents and hand it in at Court as documentary evidence. The reason why the Banks are not doing it is because the originals are endorsed by the Registrar as proof and confirmation that these documents (Home Loan Agreement and Related Securities) were securitised. Many Banks have in the past claimed that the subject documents were destroyed in a fire that  gutted the document storage facility, Docufile in Midrand on 28 August 2009. In most cases so far, the Banks have succeeded with this excuse but in the case of Absa vs James Grobbelaar and Kevin Jenzen, Judge Roland Sutherland ruled against the Bank, arguing that Rule 18(6) of the Court Rules requires a plaintiff to produce relevant documentation when seeking to press their case. Absa has not done so. “There is no doubt that failure to annex the loan agreement constitutes non-compliance with the rule.” The Banks could have asked for all their Bond Holders to sign new documents and in that way rectify the situation. You as Bond Holder have a strong case if you correctly claim that
6. Your Home Loan Agreement and Related Securities were securitised. If so, the full outstanding amount of the bond was paid by the investor and only the investor has locus standi to sue you for any alleged arrear payments. The Banks no longer owns your property and cannot prove ownership or a loss.
7. This, if proven, is a deliberate and intentional concealment of the facts.  

If you are happy that the Banks have produced all the original documentary evidence you and your legal team can argue the matter to reach a mutually beneficial solution.

All parties to a Foreclosure action have various remedies. If you can prove that you have been a victim of Securitisation, you can claim restitution for one and file criminal charges against the Bank for investigation by the SAPS/NPA.

AND . . . . after all the above, it remains your duty to secure your assets and the guard against any mal practices by any outside party. I  will publish my own views on the foreclosure process and explain why and what you MUST insist on that the banks bring to Court.

There is a lot more to discuss. I will follow up with short explanations of various Home Loan related topics.