Home Loan & Mortgage Disclosure Bill: discussion

Meeting report

HOUSING PORTFOLIO COMMITTEE
3 October 2000
HOME LOAN AND MORTGAGE DISCLOSURE BILL: DISCUSSION

Relevant Documents:
Home Loan and Mortgage Disclosure Bill [B 53-2000]
DP's Proposed Amendments [see Appendix 1]

SUMMARY
The meeting was a formal clause-by-clause consideration of the Bill.

The DP representative advocated that the Bill's references to the establishment of an Office of Disclosure be deleted as it would establish yet another bureaucratic structure. This was rejected by the rest of the Committee Members. The Director General maintained that the Office was necessary since the Department did not have sufficient capacity to fulfill the functions and objectives of the proposed Office.

There was concern that the clause 8 provisions, excluding criminals, were not broad enough to encompass white collar criminals. The lawyers agreed to amend this.

The Director General replied that their intention is to have the Community Re-Investment Bill tabled early next year.

MINUTES
The Director General of the Department of Housing, Ms MZ Nxumalo-Nhlapo, and Mr Thatcher, a lawyer with the Department, attended the meeting along with Mr Hoon, a State Law Advisor. The meeting was a formal clause-by-clause consideration of the Bill:

Preamble
Mr Lee (DP) objected to the spelling of the word "leveling", saying it should be spelled "levelling". Mr Thatcher said the spelling in the Bill is the one his computer accepts. The Chairperson, Ms Hangana, asked the Committee if the spelling of a word was something they were "willing to die for". If so, she suggested they come armed with dictionaries. Mr Pheko (PAC) asserted spelling is something they should have a policy about and apologised for having no dictionary. The Director General ended the discussion by saying, "level is level!"

Dr Rhoda (NNP) suggested that the following be added to the final clause of the Preamble: "and it is not the intention of this Act to promote in any way unsound lending practices". This was unanimously agreed to.

Clause 1 - Definitions
The Director General suggested a new definition be added, " 'person' includes a juristic person", at clause 1(x). This suggestion was agreed to unanimously.

Chief Mtirara (UDM) commented that in rural areas, the notion of "home" may be different from how "home" is defined in the Bill. The Director General said to discuss the definition of "home" would touch on other Acts; the definition in this Bill is meant to be a working definition for the use of financial institutions. The Chief asked, then, if the definition of "home" for the purposes of this Bill was limited to homes with title deeds. The Director General said as long as a financial institution recognises it as an asset, it is a home. The Chair agreed that the Housing Act would be the appropriate place to look at the definition of home.

Clause 3 - Information to be disclosed by financial institutions
Mr Lee (DP) suggested the terms "financial period" and "financial year" be defined, arguing the references are there, but undefined. Mr Thatcher answered it was not an issue at all. A financial period is normally one year, but if it is shorter, such as in the first year, it may be called a "period". Mr Lee said banks and applicants could claim to not know what the terms mean and hide behind this ignorance.

The Director General responded that she recognises in the new democracy, interrogation of legislation is the prerogative of all citizens and she recognised Mr Lee's comment in that spirit. She insisted, though, that this is a definition commonly used and well-known by banking professionals.

Clause 4 - Establishment of Office of Disclosure
Mr Lee suggested clause 4, establishing an Office of Disclosure, be deleted on the basis that it is yet another bureaucratic structure.

Ms Coetzee-Kasper (ANC) said the Office is necessary.

Mr Lee responded that the Office was superfluous and expensive.

Ms Phantsi (ANC) asked Mr Lee to withdraw his suggestion, telling him he knew the rest of the Committee would not agree.

The Committee agreed to clause 4, with the exception of Mr Lee. Mr Lee left the Committee Room soon after.

Dr Rhoda (NNP) asked why there had to be a special office to perform the functions enumerated in clause 5. He claimed this was what Mr Lee had been trying to say. He asked if these functions were not already available within the department.

The Director General said if the reason the DP suggested deleting the provision for an Office of Disclosure is the assumption that the Department of Housing has the resources to deal with everything, it did not.

Clause 5 - Functions of Office
A Member asked what the criteria for the functioning of the Office would be.

The Director General said they wanted guidance from the Committee as to whether a requirement to rate financial institutions was necessary. She asked if ratings should be included and, if so, if these ratings should be made public. She said she wanted the criteria to be included in the regulations rather than the legislation since they might change in five years. All Committee Members agreed to this amendment.

Mr Schneemann (ANC) asked if the amendments listed by the DP in their submission were the only amendments the DP thought should be made.

Dr Rhoda (NNP) said that as they were the DP amendments, he could not comment on this.

Ms Coetzee-Kasper (ANC) said housing is critical and asked why clause 5(2)(c) and (d) said "may" whereas clause 5(2)(a) and (b) read "must".

The Director General responded that for clauses 5(2)(c) and (d) "may" is not an option but only means, in this context, "if it is necessary to". In effect then, here, "may" means "must".

Clause 8 - Period of office, vacation of office and filling of vacancies
Mr Skhosana (ANC) asked about clause 8(2)(e) and if it reflected serious crime, as it was intended to.

Mr Thatcher responded that no court would imprison someone without the option of a fine if it were not a serious crime. This, he said, does not happen in practice.

Mr Douglas (IFP) asked if they were drawing a line between white-collar crime and violent crime.

The Director General asked the State Law Advisor to find out what is considered to be "serious" in terms of fines. She added that the courts do sometimes take decisions that are unpopular; for example, the imposition of fines without imprisonment for serious white-collar criminals. She said they would look for a benchmark.

Mr Nzimande (ANC) said the reference to mental health in clause 8(2)(d) was "vague".

Mr Thatcher said this remark was noted and would be dealt with.

Clause 12 - Regulations
Dr Rhoda said they wanted the Minister to consult more broadly, with Parliament as well as the housing and finance industry.

The Director General responded that this point is redundant and does not require specific legislation. She added that once they started making a list of people with whom to consult, they would inevitably leave someone out.

Clause 14 - Exemptions
The Director General noted that many Members were unhappy with the extension to beyond one year of the exemption at clause 14(2): "but may be renewed by the Minister upon submission of evidence that any of the circumstances contemplated in subsection (1) still applies to the financial institution, or category of financial institutions."

She agreed that a financial institution should be able to establish the appropriate infrastructure within twelve months and so an extension is unnecessary. A time limit of one year puts pressure on them to "get on with it". The Committee agreed to delete the words quoted above from clause 14(2).

Clause 15 - Offences and penalties
Ms Phantsi (ANC) asked, when the word "person" is used, how would a distinction be made between a human being and an institution.

Mr Thatcher responded that clause 15 should have included juristic persons, but the change in the definitions section would remedy this.

Mr Skhosana (ANC) asked what if it was noticed that many irregularities were in one geographical area? How would judgment be passed on such a situation?

Mr Thatcher responded that it is always a question of evidence; a conviction cannot be obtained with insufficient evidence.

The Director General said that if many irregularities were identified in one geographical area, they would relate the problems back to the specific institutions where they originated. The geographic area should not matter, she said.

General Discussion
Dr Rhoda (NNP) asked why the responsibilities of the proposed Office of Disclosure not be handled by the Department of Housing?

The Director General replied that the Department of Housing wants the Office of Disclosure to fulfill the objects of this legislation. But the Department now, as designed, with only 250 people, does not have the capacity to perform the functions of the Office. She also reflected that the reality of the current situation is that a government department would not be able to provide the banking expertise required for the proposed office. Expertise is required to determine if a loan decision was unfair or fair. She pointed out other offices with very specific purposes, for example, the Scorpions. These offices have an element of independence; they are almost "stand alone" operations.

The Chair announced the Department would table the proposed amendments the following day for formal adoption. She asked the Director General about the absence of the Community Re-Investment Bill and whether it would be tabled in the near future.

The Director General replied that their intention is to have the Community Re-Investment Bill as soon as possible, around the first part of next year.

The meeting was adjourned.

Appendix 1:

THE DP'S AMENDMENTS TO THE HOME LOAN AND MORTGAGE DISCLOSURE BILL

Preamble (Page 3) after "in respect of home loans" add.

- The act nor the regulations are intended to promote unsound lending practices or the allocation of credit.

The Preamble line 40

Rectify spelling of the word "leveling" - levelling

 

CHAPTER 1

Definitions add

vi) Define a "Financial period"

vii) Define a "Financial year"

4. Establishment of Office of Disclosure - Delete

 

Functions of the Office Disclosure should be to:

- Receive the required information.

- Analyse and interpret such required information

- Assist in identifying possible discriminatory lending patterns.

- Report to the Minister annually in respect of its work, including an analysis of each financial institutions performance in complying with the Act.

- Make recommendations on matters falling within the purview of the Act.

 

Regulations (Section 12)

After the Reserve Bank insert "Parliament and the Housing finance industry"

12 c. "In prescribing regulations, every effort must be made to minimise the costs incurred by financial institutions in complying with them".