Letter From The Editor Nedbank is running a fabulous competition in

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					April 2007
       Letter From The Editor

       Nedbank is running a fabulous competition in their latest Homeloans campaign. More information is given
       in this edition.

       A court judgment last month ruled that an expiry date on an offer to purchase a property is inserted solely
       for the benefit of the potential buyer, which he or she can choose to waive should the offer be accepted
       after the expiry.

       United Nations special rapporteur for adequate housing Miloon Kothari has criticised SA’s housing policy,
       saying there appeared to be an increasing gap between delivery of housing and legislation - which could
       affect development.

       Dale-Anne Reiss, Global Director of Real Estate at Ernst & Young, identifies 10 worldwide property trends
       she believes will create opportunities for investors.

       On the 16 March this year a new Code of Conduct for home-builders came into effect, which is regarded
       as tough and comprehensive. The significant and far-reaching provisions are designed to give protection
       to housing consumers contracting with home builders for the construction of homes.

       While the purposes of the new National Credit Act (NCA) have been clearly laid out, a fair amount of
       uncertainty exists as to exactly what the ground-level implications of the Act will be, and how current
       developments will impact on the Mortgage Origination Industry. More on the NCA “madness”.

       There is also an article on International trends in bond origination, including the USA, UK, Australia, New
       Zealand and Europe.

       As always we value your feedback or suggestions and these can be emailed to Lynn Duffy at


       Lynn Duffy

                                              The views expressed in this publication are not necessarily those of
Page 2 of 11                                  Nedbank. The objective of this publication is to bring the relevant industry
                                              articles to the readers’ attention.
       In The News


       The Campaign in a Nutshell

       Clients who finance their home loans through Nedbank between 18 April and 30 June 2007 will be
       entered into a lucky draw in which they stand a chance to win a dream holiday home in one of these
       luxury South African resorts:

       Sparrebosch (Pezula)
       V&A Waterfront

       The client's home loan needs to be granted during the campaign period (18 April to 30 June) to be
       entered into the lucky draw.

       A Bit More Detail

       Nedbank will buy the property for the client on a fractional title basis. This means that the client will have
       collective ownership of an asset. Usage is normally allocated to shareholders (owners) by means of an
       ownership usage roster. In addition, Nedbank will pay the levy for two years.

       Clients are also invited to SMS the word ‘HOLIDAY’ to 31673 if they are interested in taking up a home
       loan with Nedbank. A Nedbank Contact Centre consultant will call the client and should the client’s home
       loan product option be granted within the campaign period, this client will be entered into the lucky draw.

       Home Loan Products

       Nedbank Home Loans offers a wide range of home loan products, some of which are highlighted below:

       The Nedbank 108% loan

       Gives you extra funds to cover the property transfer and home loan registration costs. The extra cash
       could be used for upgrading your home, landscaping your garden or even furnishing your home.

       The Nedbank HomeVision loan

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       This convenient option makes it possible for you to access surplus funds at a future date without the
       inconvenience of registering a second bond or paying additional registration costs.

       This is how it works:

       o        Simply register your initial bond for a higher amount than initially required.
       o        Apply for the surplus funds once the value of your property and your affordability have
       o        Monthly repayments are calculated only on the funds paid out and not on the amount


       Is a convenient facility that allows you to deposit surplus funds into your bond, which reduces your
       outstanding balance and saves you interest. These funds can be withdrawn at any time.


       Allows you access to the capital amount already paid off on your home loan without having to register a
       further bond.

       Payment Holiday

       This option is for clients who have sufficient funds to pay for property-related costs, but would like an
       opportunity to buy all those essential household goods. With this option you can do just that, because
       your first instalment is payable only in month four.

       A choice of fixed rate options

       o        Variable-interest-rate will be linked to the prime lending rate, meaning you would benefit from
       any decrease in the lending rate.
       o        A fixed-rate option, on the other hand, gives you the certainty of a constant monthly repayment
       over 1, 2, or 5 years.

       Need more information?

       For more information visit www.winaholidayhome.co.za or contact your Nedbank Home Loans

       When a seller signs an offer to purchase – it’s binding
       A court judgment last month ruled that an expiry date on an offer to purchase a property is inserted solely
       for the benefit of the potential buyer, which he or she can choose to waive should the offer be accepted
       after the expiry.

       The ruling came about after a certain seller accepted an offer to purchase after the specified expiry date –
       which she later attempted to use as way out of the contract.

       “This was a case of seller’s remorse”, says Barak Geffen, Executive Director of Sotheby's International
       Realty, South Africa, commenting on the outcome of the case.

       “The decision reinforces the principle that once an offer to purchase is signed by the seller, it becomes a
       legally binding agreement. If one suddenly develops seller’s remorse, it will take the consent of the buyer
       to make the agreement null and void.

       “The ruling also highlights the importance of thoroughly considering the pro’s and cons of an offer to
       purchase and ensuring you enlist the services of a reputable agency to represent your property,” notes
       Geffen. “The agency will work out the best deal for both buyer and seller, as well as accurately advise
       both parties through their in-depth market knowledge.”
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       In the recent court case, the agent found a buyer for the seller’s Sedgefield property, who signed an offer
       to purchase. The offer stated that it was irrevocable and would expire at noon on 8 November 2003;
       however the estate agent only faxed the offer to the seller the day after the specified expiry date.

       “The seller signed the offer and faxed it back to the agent, but then realised that she could have obtained
       a higher price for her property and refused to sign any further documentation or respond to calls.”

       An application to the Cape High Court was launched by the buyer to compel the seller to sign the
       necessary documents, so that transfer could be registered. The seller opposed the application on the
       basis that because she accepted the offer after it had already lapsed, an argument the judge eventually
       ruled against.

       “As an agent working for both parties it should be an imperative to get offers of purchase signed by both
       parties prior to specified expiry, thereby leaving no room for discrepancy,” Geffen observes. “Sellers must
       realize, however, that this expiry deadline is there for the benefit of the potential buyer only.”

       Issued by Lange Strategic Communications on behalf of Sotheby’s International Realty South Africa, April

       UN observer shocked at state of SA housing
       United Nations special rapporteur for adequate housing Miloon Kothari has criticised SA’s housing policy,
       saying there appeared to be an increasing gap between delivery of housing and legislation - which could
       affect development.

       Kothari, who is halfway through a two-week visit to examine and report to the UN on the state of land and
       housing rights in SA, said yesterday that preliminary impressions after visiting Northern Cape, Limpopo
       and Gauteng were that policy at national level, such as the social inclusion policy, was not filtering down
       to local government, and so increasing segregation.

       Speaking after talks with 11 nongovernmental housing organisations in Johannesburg, he said: “Some of
       what I have seen was worse than I expected.”

       Kothari was shocked at some of the living conditions of Johannesburg’s inner- city poor, which he saw
       during a visit on Tuesday, particularly those living in buildings where water had been cut off.

       “I do not accept the argument that these buildings used to be privately owned so the municipality can
       wash its hands of ultimate responsibility for residents. A visit to properties owned by the Johannesburg
       Social Housing Company suggests there are problems with implementation. Joshco and Johannesburg
       Water are public companies. Who is monitoring these companies and projects to ensure delivery? It
       should be the municipality,” said Kothari.

       He said nongovernmental organisations in developing countries, such as India, where he is from, were
       jealous of the progressive standards in SA, and the fact that the right to housing was enshrined in the
       constitution and in judgments of the Constitutional Court.

       “This is sufficient ground for policy that ensures the rights of the most vulnerable are protected.”
       Segregation between the rich and the poor was increasing, he said.

       “The implementation gap as a preliminary observation seems to be growing instead of narrowing and that
       is where I will be looking and trying to find ways to reverse that trend.”

       Businessday, 19 April 2007

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       Ten global trends will keep the property market on the boil
       The world’s equity markets look shaky and key housing markets are in decline. But commercial property
       markets are powering ahead. Where to put your money?

       Ernst & Young’s global director of real estate, Dale Anne Reiss, has identified 10 worldwide property
       trends she believes will create opportunities for investors.

       Opportunities abound in commercial property
       Some residential markets could crash

       1.Investment in infrastructure. Governments don’t have enough funds to develop, modemise and maintain
       their roads, bridges, dams, sewers and other infrastructure. Global investors are beginning to invest in
       infrastructure as the returns on commercial properties fall.

       “Infrastructure will quickly rival other property markets,” says Reiss, “with trillions of dollars spent to bring
       infrastructure up to standard or to develop new infrastructure.”

       2. The US housing market is in decline. Loan defaults are rising this year and some home prices are
       drastically reduced. This could affect sentiment in other housing markets.
       One of the most potentially damaging factors is stretched home buyers, says Reiss. Some banks in the
       UK, for instance, are giving loans of five times buyers’ income.

       3. Private equity property deals totaled US$l6Obn in 2006, which made real estate the second most
       active sector. “Private equity will continue to dominate the real-estate headlines this year,” adds Reiss.
       Even before private equity giant Blackstone’s $39bn acquisition of US-listed real estate investment trust
       Equity Office Properties earlier this year, the trend was overwhelmingly going from public to private and
       will spread to countries like SA.

       4. The globalisation of real estate investment trusts (Reits) will create more Reits outside the US than in it
       for the first time in 2008, making global property investment easy and widespread.

       More than 29 jurisdictions, including SA, are adopting the legislation necessary to start the development
       of Reits.

       5. Green buildings, once dismissed by developers as too expensive, will become a must as tenants,
       lenders, residents and even investors push for sustainability. “Expect green principles to become
       synonymous in the real-estate industry with cost-efficient operating principles,” says Reiss.

       6. Hot property markets in Brazil, Russia, India and China will become established in the next few years,
       with strong flows of direct foreign capital. SA, Mexico, Romania and Turkey are moving up the list.

       7. Cross-border capital flow will take off as investors step up the search for higher yields and new
       opportunities in previously untouched markets.

       “Given the growing power of petrodollar economies, and the increasing sophistication of global data, we
       expect capital flows to become more complex over the next 10 years,” says Reiss.

       8. The power of demographics. India’s booming population and rapid urbanisation are spurring housing
       construction. The wealth of call centre and technology services employees is creating a huge demand for

       The baby boom generation retiring at the rate of lOm/year in the US has also stimulated a boom in
       retirement communities for active retirees, and second-home developments. Similar trends are evident in
       Europe and Japan.

Page 6 of 11
       Populations of countries in Asia, Africa and the Middle East are getting younger and developers are
       focusing on creating housing and retail centres there.

       9. The so-called café workforce. “Have you noticed the number of people using laptops in coffee shops?”
       asks Reiss. “They point to one of the biggest potential trends this year: the reduced need for office

       10. Designing out obsolescence. Expect more developers to embrace building techniques that allow
       flexibility in the project to cater for different future needs of their users should the market change. In 50
       years this trend may minimise the need for redevelopment on the scale we see

       Financialmail, 16 April 2007

       Home-builders faced with tough new code of conduct
       A thirty day window for consumers entering into new building contracts, restrictions on clauses that could
       erode consumer rights and the capping of deposits form part of a tough and comprehensive new Code of
       Conduct for home builders that came into effect on March 16 this year.

       The significant and far-reaching provisions are designed to give protection to housing consumers
       contracting with home builders for the construction of homes according to David Warmback of Durban law
       firm Shepstone & Wylie.

       The code has been drawn up by The National Home Builders Registration Council (NHBRC) in terms of
       Section 7 of the Housing Consumer Protection Measures Act and is intended to provide minimum
       standards to be maintained by all NHBRC Home Builders.

       Warmback says all role payers in the residential property development industry, including builders, other
       property professionals, financial institutions, purchasers and conveyancers, will need to familiarise
       themselves with the new Code which contains important provisions relating to the development of
       residential homes.

       Some of the far reaching provisions embodied in the new Code of Conduct for Home Builders include :

       * Home building contracts may now only be concluded once the housing consumer has had 30 calendar
       days to view the contract;

       * Restrictions on clauses in contracts, which have the effect of taking away consumers common law or
       statutory rights;
       * Restricting deposits to no more than 10% of a contract price of a fixed cost building contract;
       * Minimum clauses that must be included in a building contract, and an obligation that a home builder
       must retain a copy of the contract and all records relating thereto, for a period of at least six years;
       * A home builder may not accept final payment under a building contract unless the bank, NHBRC or
       competent person has certified in writing that the work has been completed according to NHBRC's
       prescribed minimum standards and guidelines.

       A home builder is defined in the Act as a person who carries on the business of a home builder and
       importantly, while the Code is no doubt aimed to target the smaller home builder, against whom most
       protection is needed for consumers, it will also be applicable to larger residential developers developing
       and selling residential dwellings whether freehold or sectional title. Home builders are obliged to register
       with the NHBRC and are obliged to enrol a particular home or development with the Council, submit
       information relating to a development and pay a prescribed fee.

       Banks are reminded that they are not allowed under the Act to lend money to consumers against the
       security of a mortgage bond registered over a home for the purchase of a home from a home builder,
       unless the Bank is satisfied that the home builder is registered in terms of the Act, that the home is or will
       be enrolled with the NHBRC and that the prescribed fees have been paid.

       The Code provides that all NHBRC home builders are obliged to observe the Code and must, as a
Page 7 of 11
       condition of membership of NHBRC, acknowledge in writing that they have received a copy of the Code.
       The code may be amended from time to time.

       Warmback says the 22 chapter code is drafted very simply, and covers the main areas of building
       contracts where consumers are most vulnerable. Home builders now have a duty to disclose a number of
       factors relating to a building contract and are under a duty to explain material terms of such contracts.

       There are also restrictions as to when the builder may commence construction of a home, particularly in
       circumstances where the land is not yet registered in the name of the consumer.

       Other chapters include obligations on the home builder not to deceive, mislead or make false statements
       to the consumer, aspects relating to quality of material and workmanship, duties in respect of contracts
       and marketing and advertising issues.

       Unless there is a benefit to a housing consumer, and such benefit is disclosed in a contract, a home
       builder may not encourage, persuade or influence any housing consumer to use or not use the services
       of a particular attorney, conveyancer or firm, a financial institution, financial assistance offered by any
       person, or the services of another home builder.

       The Code also provides that a building contract must also contain a prescribed list of minimum clauses
       most of which, Warmback says, are sensible and practical. Importantly the contract must include the date
       when the home builder must begin building the home and the date when the home will be completed, and
       in the case of the sale of a sectional title unit off plan, the latest date by which the unit will be registered in
       the name of the purchaser.

       Failure by home builders to comply with the Code could have serious consequences in that the NHBRC
       are entitled in terms of section 11 of the Act, to withdraw the registration of a home builder where such
       home builder has been found guilty by the disciplinary committee on a charge that the home builder has
       contravened the Code.

       “The aim of the Code is the protection of the housing consumer which is clearly needed, and if the Code
       is strictly adhered to, there is no doubt that consumers will be far better off,” says Warmback.

       The Code is comprehensive and in seeking to address a vast number of issues, contains many quite
       onerous provisions for the home builder to comply with. In an industry, which historically has a poor
       reputation for protecting consumers, particularly in the lower end of the market, it is anticipated that it will
       take some time before the industry is able to properly embrace the good intentions behind the Code.

       Rodney Hayter, 6 April, 2007

      Finding meaning in the madness surrounding the National Credit Act
      While the purposes of the new National Credit Act (NCA) have been clearly laid out, a fair amount of
      uncertainty exists as to exactly what the ground-level implications of the Act will be, and how current
      developments will impact on the Mortgage Origination Industry

      Here Mary-Anne Geach from Ned Home Loans Sales and Distribution answers some of the questions on
      everyone’s lips, as she takes a look at how responsible credit granting and transparency will impact the
      application process for a mortgage loan, and the approach the banks and Mortgage Origination Industry
      are taking to meet the compliance requirements of the NCA in the Mortgage Origination Channel.

      What key areas of the National Credit Act which impact the application process?

      The key areas that will be impacted are:
      • Responsible Credit Granting
      • Transparency/Disclosure
      Of course, it’s important to understand this impact within the broader purpose of the NCA, which is: to
      promote and advance social and economic welfare of South Africans, promote a transparent, competitive,
      sustainable, responsible, efficient, effective and accessible credit market and industry and to protect
Page 8 of 11
      How will promoting responsible credit granting impact the application process?

      It means that consumers are responsible for truthfully and fully answering requests for information, and
      ensuring they submit accurate and complete information. This enables the Credit Provider to conduct an
      assessment 0f the consumer, based on the information provided, to determine if the consumer will be able
      to meet all their financial obligations.

      How does disclosure/transparency impact the application process?

      The act requires that the Credit Provider give the consumer certain prescribed documents before a credit
      agreement is entered into. For a mortgage agreement, this includes a pre-agreement statement and
      Consumers also have the right to request the reasons for credit being refused, and to the confidential
      treatment of their information.
      Each of these areas has an impact on the roles and responsibilities of the Consumer, the Banks and the
      Mortgage Originators during the Mortgage Origination Channel application process.

      What approach is being taken by the banks and the Mortgage Origination Industry to
      meet NCA requirements?

      In November 2006 an Interbank Forum was created to work with the Mortgage Origination Industry to
      meet the compliance requirements of the National Credit Act in the Mortgage Origination Channel.

      What is the objective of this forum?

      To promote the efficient implementation of the National Credit Act in respect of Mortgage Origination,
      through a standard industry approach, for -areas that are non-competitive in nature.
      The forum agreed to the following workstreams to address the key areas:
      • The respective roles and responsibilities of agents and non-agents, within the context of the regulations
      of the-NCA.
      • The use of industry standard process terminology to describe the stages of the mortgage origination
      application process post NCA.
      • The identification and standardisation of NCA data and disclosure requirements at application stage to
      ensure compliance with consumer rights, credit marketing practices, prevention of reckless credit and
      statistical reporting.
      • Borrower education.
      • The potential industry impact during the transition phase.
      Discussion papers have been developed which the banks and the Mortgage Origination Industry have
      reviewed and the comments tabled with the Steering Committee. Certain questions and points for
      clarification have been identified and raised with the National Credit Regulator, via the Banking Council.
      The final outcomes from this forum will be communicated once they have been finalised.

      Property Professional, March/April 2007

Page 9 of 11
      International News
      International trends in bond origination
      The function of the bond originator is actually broking, and this term is probably more
      accurate to describe the activities of the mortgage broker However, different countries
      use different terms and origination models, mid Jack Trevena, MD of homeloan originator
      BondExcel, takes a fascinating look at the industries in various countries

      The term origination, in a general sense, refers to the provision of complete applications for homeloans to
      a. financial institution for approval and subsequent registration of the property For the application, a
      commission is paid to the originator. However, the models used to perform this function varies widely in
      different countries.

      In the USA, homeloan books (i.e. what is owed to banks) are owned predominantly by Fannie May and
      hundreds of banks, most of which are regional. Fannie May is an institution that finances the American
      Dream— home ownership for all. It is a government-sponsored organization with a book exceeding $3
      In the US, mortgage originators deal with so-called services organizations to get transactions approved
      and documentation processed. Where the originators are not dealing directly with the banks, commission
      is received from these services organizations.
      Services organizations provide all of the functions we know of as credit approval, attorney instruction,
      documentation, statementing (invoicing) and collections.
      Commissions vary widely depending on the activities undertaken by originators, so no direct comparison
      can be drawn between South Africa and the US.
      However, many mortgage originators have facilities in their offices to process transactions on behalf of
      service organizations, and mortgage originators pay up to $150 per application to submit to these
      services organizations. The amount is refundable should the deal be successful and this mechanism
      inhibits poor-quality applications and multi-submissions.

      In the UK, mortgage origination as we know it, does not exist. The model used in South Africa is,
      however, being considered by a number of organizations. Currently in the UK, so-called warehouses
      process applications from IFAs (independent financial advisers or insurance brokers), estate agents and
      other lead providers. The banks provide homeloans through their consultant forces. It is interesting to
      note that mutual building societies still exist in the UK, with Nationwide probably being the best example.
      Commissions vary from as little as 0.22% for lead provision only, to about 1% for Lilly completed

      Australia began its mortgage origination about three years before South Africa, when Aussie homeloans
      became a huge thorn in the side of the banks. Looking pretty much like the South African industry the
      Aussie homeloan industry had a two-fold thrust. Firstly, to reduce the rates payable by clients and,
      secondly, to create a highly mobile and visible sales force which operates at the convenience of the
      client, i.e. in the client’s home or office.
      This approach shook the industry at the time it was implemented and the model became the example for
      South Africa to follow.
      Practically every structure that we know of in South Africa exists in Australia, from standalone large
      mortgage brokers, as they are called in Australia, to originators who perform varying levels of
      administration and documentation for smaller mortgage originators (aggregation), as well as very small
      originators who deal directly with the banks.
      What is fascinating about the industry is that because they pay as little as 0% commission to lead
      providers, their commission structure normally comprises a trail commission. For example 0.75% is paid
      on registration, then, say, another 0.2% per annum is paid by the bank, provided the transaction remains
      in the books of the bank.
      The net result is that mortgage brokers are able to fund themselves upfront and build annuities over time
      from the trail commission. An important consequence is that switching becomes counterproductive for the
      mortgage broker; as all they do is forfeit future annuity income.
Page 10 of 11
      $150 and $350 and homeloan consultants receive similar fees per transaction, as opposed to ad velorum
      commission—a percentage of the transaction valise, which increases as the amount registered increases.

      New Zealand
      The industry is structured sales force which operates at the convenience similarly to the Australian
      industry although there are many more one person businesses that deal directly with the banks.
      The commission paid to estate agents is between NZ$150 to $350 and homeloan consultants receive
      similar fees per transaction, as opposed to ad velorum commission- a percentage of the transaction
      value, which increases as the amount registered increases.

      Europe does not have mortgage origination in any sense of the word, other than the model adopted in
      As can be seen from these instances, South Africa is right up there with best in the world, as is often the
      case in our financial services sector.

      Property Professional March/April 2007

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