PROGRESS ON THE IMPLEMENTATION OF THE HOME LOAN AND MORTGAGE DISCLOSURE ACT 2000 (ACT NO. 63 OF

2000(HLAMDA) TO THE PORTFOLIO COMMITTEE

PRESENTER : OFFICE OF DISCLOSURE

DATE : 4 FEBRUARY 2014

1

PURPOSE OF THE BRIEFING

• First interaction with the Portfolio Committee• Briefing the Portfolio Committee on the

establishment of the office• Briefing on progress made on implementation

of the Act• Wayfoward of the Office

2

TABLE OF CONTENTS

1. BACKGROUND2. HOME LOAN AND MORTGAGE DISCLOSURE ACT, 2000

(ACT 63 OF 2000) (HLAMDA)3. ESTABLISHMENT OF THE OFFICE4. COMPOSITION OF THE OFFICE OF DISCLOSURE5. MEMBERS TERMS OF OFFICE 6. FUNCTIONS OF OFFICE OF DISCLOSURE7. HOW WE EXECUTE THE MANDATE

3

TABLE OF CONTENTS

10. WHO IS TO COMPLY WITH THE ACT11. LIST OF FINANCIAL INSTITUTIONS10. ENGAGEMENTS WITH STAKEHOLDERS11. INTERVENTION MEASURES12. RISKS INHERENT TO THE HOME LOAN PROCESS13. ACHIEVMENTS14. CHALLENGES15. WAY FORWARD FOR THE OFFICE16. ANNEXURES

4

BACKGROUND

• The Home Loan and Mortgage Disclosure Act ,2000 ( Act 63 of 2000) (HLAMDA) was enacted in 2000.

• The regulations were Gazetted on 13 July 2007 as Notice 842 of 2007.

• In terms of Presidential Proclamation No. 15 of 2007 the Act came into operation with effect from 02 July 2007.

5

HOME LOAN AND MORTGAGE DISCLOSURE ACT, 2000 (ACT 63 OF 2000 )(HLAMDA)

PURPOSE OF THE ACT

“ To promote fair lending practices, which require disclosure by financial institutions of the information regarding the provision of home loans; to establish an Office of Disclosure; and to provide for matters connected therewith”.

• The Act gives the Office a mandate to monitor the financial institutions’ lending practices and patterns through receiving and analysing information.

6

ESTABLISHMENT OF THE OFFICE

• The Office of Disclosure is established in terms of Section 4 of the Act while members of the Office are appointed in terms of Section 6 of the Act.

7

COMPOSITION OF THE OFFICE

• Ms. Thebi Moja Chairperson• Dr. Morgan Pillay Deputy Chairperson• Adv. Tshepiso Mphahlane Member • Ms. Penelope Beck Member • Ms. Thembeka Semane Member • Mr. William Hoefling Member • Dr. Makhosana Nyamazana Member • Mr. Harold de Kock Member • Ms. Nozi Jikazana Member

8

MEMBERS TERMS OF OFFICE: APPOINTMENT DATE

The members were appointed in different periods as follows:

• The first Office bearers were appointed on 9 December 2010.

Ms. T Moja Chairperson Adv. T Mphahlane Member Ms. P Beck Member Ms. T Semane Member

9

MEMBERS TERMS OF OFFICE: APPOINTMENT DATE

• The rest of the members were appointed with effect from 27 July 2012

Mr. W Hoefling Member Mr. H de Kock Member Ms. N Jikazana Member Dr. A Pillay Deputy Chairperson

• The last additional member Dr. M Nyamazana was appointed on 28 September 2012.

10

MEMBERS TERMS OF OFFICE

• In terms of Section 8(1) of HLAMDA, Period of office, vacation of office and filling of vacancies, “A member of the Office must be appointed for such period, not exceeding three years, as the Minister may determine at the time of appointment”.

• The term of Office for the first 4 members appointed on 9

December 2010 has ended on 9 December 2013 in terms of Section 8(1) of HLAMDA.

11

FUNCTIONS OF OFFICE OF DISCLOSURE

(a) Receiving the required information;

(b) Analysing and interpreting the required information;

(c) Receiving and investigating public comments on financial institutions relating to home loans;

(d) Making available to the public, information that indicates whether or not financial institutions are serving the housing credit needs of their communities and rating such financial institutions in accordance with such information;

12

FUNCTIONS OF THE OFFICE OF DISCLOSURE cont…

(e) Assisting in identifying possible discriminatory lending patterns and assisting any statutory regulatory body in enforcing compliance with anti-discriminatory legislation;

(f) Reporting to the Minister annually in respect of its work during the preceding year, and such report must include analysis of the performance of each financial institution in complying with the terms of the Act; and

(g)Making recommendations to the Minister on any matter falling within the scope of this Act.

13

HOW DO WE EXECUTE OUR MANDATE• HLAMDA REGULATIONS

The regulations have been made in terms of Section 12 of HLAMDA.

The regulations have been implemented with its set of guidelines to financial institutions on how information must be disclosed to the Office simultaneously with the Act through a Government Gazette Notice No. 842 of 2007 with effect from 2 July 2007.

• SECRETARIAT

The Department has established a Secretariat of the Office of Disclosure within the department to carry out the mandate in terms of Section 11 of the Act .

14

HOW DO WE EXECUTE OUR MANDATE

• REPORTING FORMAT The Compliance Manual is a guiding tool on how information should

be disclosed to the Office.

• ANNUAL RETURN FORM This is an aggregated information captured as follows:

(1) The total number and Rand amount of applications -– (a) Received– (b) Approved– (c) Declined– (d) Disbursed

(2) The total number of applications received, approved, declined, and disbursed, respectively, in respect of:– (a) Race groups (African, White, Indian, Coloured)– (b) Province

15

WHO IS TO COMPLY WITH THE ACT

• All financial institutions that are registered in terms of the Banks Act,1990 (Act No. 94 of 1990).

• All registered in terms of the Mutual Banks Act,1993 (Act No. 124 of 1993).

• Any registered financial institution whose business is, in full or in part either the acceptance of deposits from the general public, the advance of credit to persons or both such acceptance and advance, with the security of a registered mortgage bond or any other form of accepted security for the purpose of providing home loans.

16

LIST OF FINANCIAL INSTITUTIONS

• ABSA Bank Limited• African Bank Limited• Albaraka Bank• Bank of Baroda• Bank of China Jhb Branch• Bank of Taiwan SA Branch• Bidvest• Capitec Bank Limited• Citibank• Credit Agricole &

Investment Bank

• Deutsche Bank AG Jhb Branch

• First Rand Bank Limited• GBS mutual• Grindrod • Habib overseas• HBZ Bank Ltd• Hong Kong & Shangia• Investec Bank Limited• Ithala Ltd

17

LIST OF FINANCIAL INSTITUTIONS

• JP Morgan Chase• Mercantile Bank Limited• Nedbank Limited• The South African Bank of

Athens Limited• SA Home Loans• SASFIN• Standard Bank• Societe Generale

• Standard Chartered• State Bank of India• Imperial Bank Limited• MLS Bank Limited• Nedcor Investment Bank

Limited• People’s Bank Limited• Rand Merchant Bank

Limited• UBank Limited• VBS Mutual Bank

18

ENGAGEMENTS WITH STAKEHOLDERS

• Workshop with all stakeholders (Financial Institutions, Banking Association of South Africa (BASA), Independent Regulatory Board for Auditors (IRBA) and South African Institute of Chartered Accountants (SAICA);

• Challenges related to disclosure of information to the Office were identified and resulted in the establishment of a Task Team;

• The Task Team was mandated to further identify challenges and propose workable solutions both technical and legislative; and

• Furthermore the Task Team was tasked with the development of the draft Annual Return format.

19

INTERVENTION MEASURES

20

Completed Progress

Regulatory return X

Audit Assurance Standards X

Awareness Campaign X

HLAMDA Amendments X

Amendments of Regulations X

Amendments of Compliance Manual

X

RISKS INHERENT TO HOME LOAN APPLICATION PROCESSES

• Financial institutions receive applications from mainly two sources i.e. their walk in customers and from Intermediaries/ Brokers. The loan originators/brokers submit initial loan applications received to all Financial Institution to increase the chance of applicant being approved for funding by at least one Financial Institution.

• This results in more than one Financial Institution reporting the same applicant in their reported applications.

• Hence there are multiple duplications in numbers submitted to the Office. This applies to number of approved/declined applications and related amounts as well.

21

ACHIEVEMENTS• Appointment of the Members of the Office of Disclosure;

• Engagements with all stakeholders who are required to disclose and submit information to the Office in terms of Section 2 and other interested parties e.g. Banking Association of South Africa (BASA), Independent Regulatory Board for Auditors (IRBA) and South African Institute of Chartered Accountants (SAICA);

• An Annual Return Form produced and approved by the Minister in Dec 2010 for implementation w.e.f 01 January 2013;

22

ACHIEVEMENTS

• A detailed report on HLAMDA prepared for the Minister in terms of the Act;

• Amendments to legislation identified and forwarded to Legal Services and State Law Advisors for example reporting format, comments vs complaints, penalty;

• Audit Assurance standards agreed upon between the Independent Regulatory Board for Auditors , BASA and financial institutions auditors in line with audit standards;

23

ACHIEVEMENTS

• Information received from financial institutions;

• Common reporting period of 01 January to 31 December for all financial institutions which is due on 02 March annually;

• Risk Impact Assessment with recommendations being finalised for purposes of statutory HLAMDA amendment;

• Amendments to legislation at an advanced stage and the department awaits certification;

24

ACHIEVEMENTS

•Engagements with Provincial Human Settlements Departments and municipalities regarding the mandate of the Office has been successfully carried out; and

•Dissemination of information brochures (Complaints Procedure Manuals and OoD Profile) to the public through the provincial departments and municipalities on the functions and responsibilities of the Office.

25

CHALLANGES• Accounting standards an impediment to financial institutions

to comply with section 2 of HLAMDA which requires disclosure of the required information in their financial statements;

• Financial institutions systems readiness to accurately capture data for disclosure in terms of the reporting categories e.g. race;

• Financial institutions reluctance to provide raw data to the Office ;

26

CHALLANGES

•Inadequate financial resources for further engagements with local authorities (Provincial departments and municipalities); and

•Inadequate resources to support the Office to facilitate public community outreach programs nationally.

27

WAY FORWARD OF THE OFFICE

• Finalisation of amendment of the Act;

• Amendment of the regulations ;

• Enhancement of the Reporting Format e.g. to include FLISP funded loans;

• Public outreach through consumer education sessions and engagements with local authorities (CDW’s, Ward Committee Members and stalls at shopping complexes); and

28

WAY FORWARD OF THE OFFICE

• Strengthen relations with Housing Institutions and other relevant Entities.

• Stronger engagements with the financial sector e.g. African Bank, Capitec;

• To improve analysis of information from financial institutions which will enhance recommendation to the Minister.

29

THANK YOU

“We have come a long way – Celebrating 20 Years of Freedom!”

30

ANNEXURES

• The Home Loan and Mortgage Disclosure Act 2000 (Act No. 63 of 2000) (A) ;

• Regulations; (B)• Compliance Manual; ( C)• Annual Return Form; (D)• Annual Report; (E)• Summary of information received from financial institutions; (F)• Proposed amendments; (G)• Comments from the State Law Advisors and response by the

Department (H).

31

CONTACT INFORMATION

OFFICE OF DISCLOSURE

DEPARTMENT OF HUMAN SETTLEMENTSPRIVATE BAG X644

PRETORIA0001

240 JUSTICE MAHOMED STREET

SUNNYSIDE, PRETORIA0001

Tel: (012) 421 1799 / 1572Fax: 0866147662 / 0866110018

E – mail: gaza.phoku@dhs.gov.za / disclosure@dhs.gov.zaToll free: 0800 146 873

32

ANNEXURE F

SUMMARY OF INFORMATION RECEIVED FROM FINANCIAL INSTITUTIONS

33

INFORMATION RECEIVED FROM FINANCIAL INSTITUTIONS FOR THE PERIOD 1 JANUARY 2012 TO

31 DECEMBER 2012

INCOME BRACKET TOTAL

R0 – R3500 NUMBER 57476

R VALUE 13034 M

R3501-R5500 NUMBER 25065

R VALUE 2653 M

R5501-R7500 NUMBER 26812

R VALUE 4227 M

R7501-R10000 NUMBER 37265

R VALUE 9499 M

R10001-R15000 NUMBER 87686

R VALUE 29327 M

15001 and above NUMBER 678126

R VALUE 477677 M

LEGAL ENTITIES NUMBER 5451

R VALUE 6781M

TOTAL NUMBER 919053

R VALUE 497185 M

34

INFORMATION RECEIVED FROM FINANCIAL INSTITUTIONS FOR THE PERIOD 1 JANUARY 2012 TO

31 DECEMBER 2012

RECEIVED SCORED APPROVED APPROVED TAKEN UP

APPROVED NOT TAKEN UP

DECLINED

NUMBER 919 053 835 799 344 792 130 398 75 556 500 069

RAND VALUE R497 185m R 479 736m R 218 209m R 70 822m R 43 700.6m R 278 640.7m

35

INFORMATION RECEIVED FROM FINANCIAL INSTITUTIONS FOR THE PERIOD 1 JANUARY 2012 TO

31 DECEMBER 2012

Applications received from HDP’S

Applications from HDP’S declined

Home Loan approved to HDP’s

Home Loan approved to person living in rural areas

Home Loan approved to person living in low density area

Home Loan approved to juristic person

Home Loan approved to women

Home Loan approved to HDP men

Total Number

814 222 356 473 398 948 155 572 156 748 10 314 269 942 273 370

Total R Value

R150 583.5m

R92 376.5m R67 059.8m R3 527.6m R3 561.7m R11 250.8m R57 623.2m R53 405.8m

36

INFORMATION RECEIVED FROM FINANCIAL INSTITUTIONS FOR THE PERIOD 1 JANUARY 2012 TO

31 DECEMBER 2012

Home Loan approved to African

Home Loan approved to Coloured

Home Loan approved to White

Home Loan approved to Asian

Home Loan approved to Other

Total Number

361 719 50 904 239 520 34 126 82 827

Total R Value

R54 955.9m R13 505.6m R136 043m R15 266.6m R10 117.7m

37