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by Housing Minister Joe Slovo
AML President Johan Myburgh, and
Piet Liebenberg, Chief Executive of the Council of Southern African Bankers

The Ministry of Housing and the Association of Mortgage Lenders this morning signed a breakthrough agreement following almost three months of intense technical discussion. Based on the "Siamese twin approach,: it ensures that government and the banks will act in unison to break the private sector logjam in the lower end of the housing market.

The agreement signals the return of the major banks to the lower end of the housing market while committing government to a strategy to upgrade communities in such a way that residents have good reason to resume bond, rent, and service payments. In doing so, it dovetails with the aims of the Reconstruction and Development Programme.

It is an agreement which rests and relies on the concerted action of government at all levels, the participation of the mortgage lenders and the construction industry, and the active participation of the communities. The agreement was reached in the remarkable spirit of social responsibility which has become so characteristic of the new South Africa.

The banks have agreed to advance loans which could total R2 billion in the first 12 months year. This has the potential to effectively double the resources available to the lower end of the housing marker in South Africa. The banks hope toe make 50 000 loans down to a value of R10 000 over a 12 month period.

Realising that fluctuating interest rates have caused unexpected financial hardship to clients with lower incomes in the past, the banks have agreed to investigate a fixed instalment instrument. Information and education campaigns will ensure that potential borrowers understand the obligations and rights associated with a mortagage loan. COSAB and the AML have met with the SABC to discuss the use of radio and television in education and information campaigns.

Agreement has also been reached on a programme linking home loans to demonstrated consistency in saving. Developed in consultation with savings and loans experts from several countries, the model aims to draw on the vast savings potential in the country which is a feature of life even in the poorest sectors of the population. It will allow bankers and prospective homeowners to build a relationship of trust based on a proven savings record.

Government has agreed to a system which will allow the banks to repossess the properties of bond defaulters in accordance with normal civil law procedures. Where this continues to prove impossible because of a breakdown in either civil or criminal law enforcement, the government will indemnify the banks case by case for a limited stabilization period of three years. The implementation of this Mortgage Indemnity Scheme is subject to Cabinet approval following detailed financial modelling.

Households illegally occupying properties in the possession of the banks, and households experiencing difficulties with mortgage repayments will receive assitance from a service company to be founded and run jointly by the banks and the government. The company will help them to find accommodation through a process of "rightsizing" which ensures that they are in accommodation which and remains affordable.

The construction sector has a crucial role to play in encouraging a return to a general culture of payment for accommodation. The government is negotiating with the industry in an effort to reach agreement on a product defect warranty scheme which will indemnify house buyers against shoddy work which has often been the trigger for bond boycotts in the past. The banks have made it clear that the construction sector must stand behind its products in the interests of the consumers, and that it must stand behind its products in the interests of the consumers, and that it must create the capacity to deal with contractors who fail to meet such obligations.

Housing Minister Joe Slovo, AML President Johan Myburgh, and Council of Southern African Bankers Chief Executive Piet Liebenberg welcome today's agreement as a major milestone on the road to housing the nation. It offers millions of South Africans the prospect of access to formal housing for the first time.

Inquiries: Martin Milburn-Pyle
Council of Southern African Bankers
Tel:: 011 838 3476

Stephen Laufer
Ministry of Housing
Tel: 021 45 7295/083
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