Getting a home loan could become harder – central bank

The Bank of Namibia has confirmed that the proposed parliamentary amendments which will make it harder for banks to repossess the homes of defaulting clients could potentially lead to discriminatory lending practices.

Lending discrimination occurs when lenders base credit decisions on factors other than the applicant’s creditworthiness.

This is as the proposed amendments to the Magistrate’s Court Act and the High Court Act seek to empower home loan defaulters, allowing them greater control over the repayment of their loans and preventing circumstances where they are compelled to sell their property against their will.

“The bank acknowledges that the measures could potentially impact the banking industry’s risk appetite in extending home loans,” central bank spokesperson Kazembire Zemburuka said.

Zemburuka said boards of banks are required to set strategy and define their risk appetite.

He said in line with the central bank’s objective of a stable, modern and inclusive banking sector, they will conduct a digital maturity assessment which will identify areas where technology can be leveraged to enhance efficiency and address areas of concern.

“Discriminatory credit practices form part of the areas that can be addressed leveraging technology and reducing subjectivity.”

Zemburuka said the central bank supports the ministry of justice’s proposed amendments and takes all accusations of discriminatory behaviour and unfair practices by commercial banks seriously.

The implementation of the Banking Institutions Act, 2023 (Act 13 of 2023) by the bank includes a provision for credit decision approvals to be carried out by individuals authorised by the bank.

“This measure is in place to guarantee that decisions within the banking sector are fair, responsive and in the best interest of Namibians,” Zemburuka said.

However, Zemburuka said due to the court’s involvement, the central bank, acting as a regulator and supervisory authority, is unable to intervene in cases where banks take defaulters to court.

He said any interference would be considered contempt of a court order, potentially making the central bank liable for interfering with or obstructing the course of justice.

As of 2021, commercial banks held repossessed items valued at N$179 million, marking an 87% increase from N$95 million at the end of 2020.

In March 2020, the banks had repossessed cars, property and equipment valued at N$88 million, up from N$65 million at the start of that year.

Legal Assistance Centre director Toni Hancox voiced concerns about potential reluctance from banks in extending loans due to the likelihood of longer waiting periods for repayment, including accrued interest.

“There might be a bit of leniency from the banks, because they may not necessarily go to court if they see that this is the law and they might have to use other options suggested by the law,” Hancox said.

Discussing the proposed amendments, Hancox anticipated a positive impact which puts individuals indebted to banks in a more empowered position.

“Now it is going to be more humane and the person who owes (the bank) money can have more say on how their money will be repaid in that they might not have to sell their property if there are other ways to repay it,” Hancox said.

Additionally, Hancox emphasised that homeowners might gain a say in determining the selling price of their houses. This contrasts with previous practices where banks repossessed and sold homes below market value, as long as it covered the outstanding debt amount.

According to the proposed amendments, banks may need to navigate additional legal procedures and requirements when seeking to sell immovable property through execution.

These procedures include the need for a court order authorising the sale and demonstrating that the sale is the most appropriate way to satisfy the judgement debt.

If the court determines that the sale of the primary home is not appropriate, it can consider alternative options.

Rule 108 of the High Court rules currently allows for judicial oversight in matters of bank repossessions.