Housing minister says she is not asleep at the wheel about home loans

Housing minister Mmamoloko Kubayi has clapped back at a housing expert who criticised her stance on home loans and said she is “asleep at the wheel”.

In a written reply to The Citizen, Kubayi says that while she welcomes and appreciates the public discussion and criticism that ensued since her press briefing at the end of August, she finds it “astonishing for the so-called experts to hurl insults at us based on alternative facts and ahistorical understanding of how the world works”.

Renier Kriek, CEO of Sentinel Homes, said last week that “the minister’s plan to change the law to force banks to explain why they reject loans to any previously disadvantaged person sidesteps the real issues in housing supply and demand, as well as any meaningful solution.”

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Kriek says banks make money from awarding credit, not from denying it

He also said credit providers are profit-driven, not racially motivated and that banks are profit-seeking enterprises that make money from awarding credit, not from denying it. “Home loans are a major source of their income and it makes sense that they are incentivised to grant as many as possible.

“It is not only implausible but also downright ridiculous to believe that there is some racially motivated cabal operating from back rooms at banks and credit providers for ends that are inimical to the profit-seeking motive of those businesses.”

Kriek added that apartheid placed ideology before profit and in a democracy, any enterprise that turns down good money over prejudice will soon go out of business or be exposed by whistleblowers from inside.

He also said that the Department of Human Settlements plans to change the law to force banks to explain why they reject loans to any previously disadvantaged person. However, Kubayi says this is not true.

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Home Loan and Mortgage Disclosure Act makes provision for disclosure – Kubayi

Kubayi says the Home Loan and Mortgage Disclosure Act (HLAMDA) was promulgated in the year 2000 to compel financial institutions to disclose information about their lending activities and practices in the home loan market.

She says this information, aimed at promoting fair lending practices, includes ‘categories of borrowers as may be prescribed’ and ‘geographic areas as may be prescribed’. The information is disclosed to the Office of Disclosure through the Secretariat which is part of the department.

“With the disclosed information we are able to unravel the race and gender of the people who are accessing the loans and where the properties they are acquiring are located. The problem we have faced as a department is poor compliance with the Act by lending institutions.”

She also said that to encourage compliance, the department is considering amendments to the Act in these areas:

• strengthen or enhance the powers of the office to be able to investigate consumer complaints about home loans
• increase the penalty amount from R100 000 to a higher amount for noncompliance
• include or strengthen the requirement for auditors to audit the returns to improve the quality of information on the returns submitted by banks.

Kubayi adds that a “discerning reader would understand that we are calling for more transparency in lending practices.”

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Discriminatory lending practices can happen in a democracy – Kubayi

She says Kriek understands little about the history of discriminatory lending practices and that “a simple Google search” can answer his questions on whether discrimination can occur in a democracy or not.

“As recent as last year May, in the US, a democratic country, ESSA Bank & Trust (ESSA) agreed to pay over $3 million to resolve allegations that it engaged in a pattern or practice of lending discrimination by redlining majority-Black and Hispanic neighbourhoods in and around Philadelphia.

“For those who are wondering, redlining is an illegal practice where lenders avoid providing credit services to individuals living in communities of colour because of the race, colour or national origin of the residents in those communities.”

Kubayi says she is quite certain that ESSA Bank & Trust (ESSA) is profit-driven and “for Kriek’s information, ESSA Bank & Trust (ESSA) is still in business”.

“Lest I am accused of unfairly comparing US banks’ practices with the financial institutions in our country, I am merely making the point that to claim that discriminatory lending practices are incompatible with profit-seeking in enterprises is downright ridiculous.

“In fact, history is replete with examples of enterprises that practised discrimination while continuing to pursue profit maximization.

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Available data shows lending practices skewed against previously disadvantaged individuals – minister

“I would like to reiterate that the picture painted by the available data, albeit incomplete, tells us that the lending activities and practices in the home loan market are skewed against previously disadvantaged individuals. I will also repeat my call for financial institutions to comply with the Act so that we can construct a more accurate picture of the home loan lending practices in our country.”

She calls on everyone to work together to “iron out distortions, if any, in the property market so that in the end the dream of a united, inclusive, non-racial and prosperous South Africa can be realised”.