n Stellenbosch Law Review = Stellenbosch Regstydskrif - Reinstatement of a home mortgage bond by paying the arrears : the need for appropriate legislative reform

Abstract

The recent case of Nkata v Firstrand Bank Limited 2014 2 SA 412 (WCC) illustrates the failure of the applicable South African statutory provisions to deal satisfactorily with the situation in which a homeowner, having fallen into arrears in respect of home mortgage obligations, thereafter remedies his default by paying the arrears to the mortgagee. The judgment exposes the lack of clarity regarding the application of subsections 129(3) and (4) of the National Credit Act 34 of 2005 ("NCA") and the mortgagor's entitlement to reinstatement of the mortgage agreement in such circumstances. It brings to the forefront the need for uniform and consistent application in all high courts of clearly articulated substantive and procedural requirements, including steps with which creditors and debtors should comply, before the sale in execution, or "forced sale", of a person's mortgaged home (sometimes loosely referred to as "home mortgage foreclosure") may proceed.

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This article discusses Nkata v Firstrand Bank and some of the unsatisfactory aspects of the decision, including the retrospective impact of the judgment upon the positions of the homeowner and the lender and also resultant adverse implications for the purchaser in execution as well as the subsequent purchaser in a private sale of the property. It also discusses the shortcomings of subsections 129(3) and (4), as well as their recent amendment by the National Credit Amendment Act 19 of 2014 ("NCAA"). Comparative observations reflect how some foreign jurisdictions' legislation regulates forced sale of a debtor's mortgaged home and reinstatement after the homeowner pays the arrears. This article emphasises the need for more appropriate legislative amendment that will give effect to the objectives of the NCA and afford the debtor's home the respect and legal recognition which it deserves while nevertheless positively affecting lenders' interests.