What is a Foreclosure?

The Mortgagor has been unable to meet to their bond repayments as per their agreement with their banking/financial institution. The banking/financial institution has had no option but to take legal proceedings against the Mortgagor, due to the breach in agreement.

What is the process before Foreclosure happens?

• The banking/financial institution issues a letter of Demand to the Mortgagor in terms of the NCA to advise that the bond account is in arrears. Thereby giving the Mortgagor the opportunity to rectify the breach of contract;
• If there is no response received, the bank then instructs an attorney to proceed to foreclosure on the property;
•  The attorney then drafts a further letter of Demand, giving the Mortgagor a further opportunity to rectify the breach;
• Should there still not be a response to the above the attorney drafts a summons and instructs the Sheriff of the Court to serve the same on the Mortgagor;
• The Mortgagor is then required to appear in court and will have a judgment against him/her. They will be listed on ITC;
• The bank then attaches the property and a warrant of execution takes place;
• A warrant of execution is better known as an Auction;

Kindly note that not all attorney firms, banks, financial institutions and sheriffs work the same and the procedures may differ slightly to the above – this is a basic outline of procedure.

How do you prevent the Foreclosure? 

• The best way for the Mortgagor to prevent foreclosure and being ” black listed ” is to sell their property!
• The Mortgagor (now the Seller) must urgently advise the estate agent with the details of the bank/financial institution attorneys who are instituting action.
• The estate agent in turn must immediately upon the sale of the property provide the transferring attorney with the details. The transferring attorney must urgently make contact with the Foreclosing Attorney in order to advise them of the sale and to urgently provide them with guarantees. Thus allowing the Foreclosing Attorney to ” pend ” their file. Should the proceeds of the sale not be sufficient to settle the arrears the Mortgagor can request the Transferring Attorney to approach the bank/financial institution and request if a payment option in terms of an Acknowledgement of Debt will be accepted for the outstanding balance.

This article has been reprinted with the kind permission of Masilo Freimond Inc.
Tel : 011 958 0488
Fax : 086 610 0276
E-mail : info@masiloincjhb.co.za