Bonds for people with HIV/Aids

27 January 2004

Trade and Industry Minister Alec Erwin has announced changes to the Usury Act to protect both banks and borrowers when the latter suffer from incurable diseases and become too ill to repay their loans.

The move will see banks having little reason to refuse housing finance to people with incurable diseases such as HIV/Aids.

Erwin said last week that the department of trade and industry (DTI) intends “to exempt certain money lending transactions, secured by a mortgage bond over immovable property, from the loan guarantee policy”.

Under the current policy, such properties may be sold to recover amounts owed on housing loans.

The notice of this exemption was published in the Government Gazette on 16 January.

Under current policy, the DTI said, people with incurable diseases such as HIV/Aids can lose their homes as a result of their failure to make repayments on their bonds, with banks then selling their homes to recover the money owed to them.

The new changes seek to stop such practices.

The new policy will see banks getting home loan guarantees from section 21 companies such as the Home Loan Guarantee Company (HLGC), and should a person fail to repay their bond, the guarantee will pay off the loan and save the borrower’s home from being sold.

HLGC chief operating officer Rudolph Willemse said his company welcomed these changes, as they wanted to see more people accessing home loans despite their HIV status.

He added that his company would provide a guarantee to banks when people with incurable diseases applied for home loans – with high premiums because of the risk -as is the case with low-income earners.

“Borrowers suffering from incurable diseases, whose money-lending transactions meet the notice requirements, may qualify for this exemption”, the DTI said. “As a result, special protection will be accorded to such borrowers.”

The new changes will also see outstanding debt being settled without banks having to sell the bonded property in order to get their money back.

The DTI said the changes would help reduce homelessness, as in the event of the death of the borrower, the person’s next of kin, particularly his or her children, would inherit the fully paid-up property.

Source: BuaNews