The borrower’s (homeownership) education programme is a prerequisite for first-time homebuyers to gain access to home loan finance.
In 2005 the banking sector concluded a Memorandum of Understanding (MoU) with the National Department of Human Settlements, in which one commitment was for mortgagees to ensure that first-time homebuyers within the Affordable Housing market segment made an informed decision when buying a home and that they understood the obligations, responsibilities and benefits of homeownership.
There are a number of topics that are covered by the respective mortgagee’s borrower’s education programmes, some of which include: discussing what a home loan is, what process is followed when applying for a home loan, affordability (which includes drawing the applicants attention to any state housing subsidies that may be available), completing the offer to purchase, what it means to be a homeowner, forms of ownership (freehold versus sectional title), budgeting, moving in, how to make payments on your home loan, why short and long term insurance is important, what to do when wanting to make home improvements and what to do should the homeowner encounter financial difficulties.
The delivery methods of the respective mortgagee’s borrower’s education programmes vary as some mortgagees provide booklets/manuals to customers while others offer the programme through electronic platforms. Upon successful completion of the borrower’s education programme, a certificate is issued to the first-time homebuyer/s. A mortgagee will not register a mortgage bond over a property until the prospective homeowners have successfully completed their borrower’s education programme.
In recent months, mortgagees have become aware that some estate agents have been completing the borrower’s education on behalf of applicants/clients. This is of concern to mortgagees as they treat borrower’s education as a pre-requisite for affordable housing first-time homebuyers to access home loan finance.
Estate agents who take it upon themselves to complete the programme for their clients goes against what the borrower’s education programme is trying to achieve and is undoubtably not in the best interest of the customer, as the rationale for borrower’s education is to ensure that customers have a good understanding of what their homeownership journey will entail. It serves as a vital source of information for homeowners and empowers them to engage on specific topics and where a customer does not seem to have a good understanding/grasp of the content. The mortgagee appointed vendors who facilitate the programme are able to re-engage customers who have been unable to successfully complete the upskilling programme and encourage them to redo the programme.
As the Banking Association we have since written to the Estate Agency Affairs Board to draw their attention to the issue and to request their intervention. As an Association representing all commercial banks in South Africa, we appeal to estate agents that under no circumstance should they complete the borrower’s education programme for their clients as they would in effect be disempowering consumers.
“In recent months, mortgagees have become aware that some estate agents have been completing the borrower’s education on behalf of applicants/clients.”