I have defaulted and I am now in foreclosure
Although we will make every effort to assist you in rehabilitating your home loan, there may come a time that we need to initiate foreclosure proceedings to recover the outstanding amounts which are due to us.
In the event that the foreclosure process has commenced, a number of steps will follow, such as:
Letter of demand/written demand
A letter of demand serves to inform the debtor and / or surety of an amount that is being claimed within a stipulated period. The Section 129 notice can also serve this purpose.
In the pleading stage a summons setting out the details of the claim is served on the borrower(s) under the home loan. Once a summons is served the borrower(s) have 10 Court days in which to defend the action. Court days are all calendar days excluding weekends and public holidays. If the action is not defended, then the mortgage in favour of whom the bond has been passed is entitled to request default judgment.
It is a judgment in favour of a Plaintiff when the Defendant has not responded to a summons or has failed to appear before a court of law.
More information about default judgment and Writ (Warrant of Execution Against Property)
A default judgment will severely injure your financial future and should be avoided at all costs. Some of the consequences of a default judgment are:
- A judgment will negatively impact your credit score.
- A judgment is valid for up to 30 years and can stay on your credit record for 5 years (provided debt obligations are settled).
If the debtor does not honour a Court judgment, the creditor may issue a warrant / writ of execution in terms whereof the Sheriff of the Court may attach and sell as much of the debtor’s property as necessary to satisfy the judgment.
Sale in execution
A sale in execution is a public auction of a bonded property by the Sheriff of the Court. A sale in execution is usually the last step that is taken when clients are unable to service the home loan repayments; the home loan is in arrears, and all other efforts at rehabilitating the loan have failed. Properties sold in this manner must be advertised in the Government Gazette and two local newspapers.
If the property is sold at auction, the borrower(s) will remain liable for the payment of any shortfall and legal costs, including the costs to sell the property at the sale in execution – this shortfall is the difference between what the property is sold for and what is owed on the bond plus interest and costs incurred.
Alternatives to foreclosure
As emphasised throughout, we strongly advise our clients to proactively manage their finances and in particular their home loan instalment commitments. It is also important that you pay your rates and utility bills on time and continue to maintain your property so that the value does not decrease. Legal action is the last resort, as it and is costly for all parties. In addition to the arrangement options discussed previously, if it is in the interests of a financially distressed client to sell his or her property, then this is a process which SA Home Loans will try to assist with.
It is generally better to sell a property privately than for it to be sold at a sale in execution as there will be fewer litigation costs and the price is typically higher with a private sale than a sale in execution.
This is a programme where SA Home Loans will assist you to market the property through our network of estate agents. The agents charge reduced commissions ensuring that you receive the maximum amount for your property. You retain control of the sales process and will have to accept or reject any offers that are received.