Banks Downscaling Home Loan Departments

Banks brace for home loan sales staff retrenchments

Retrenchments are looming in the home loan departments of two of the four major banks, according to Business Report on Thursday.

Chief executive of First National Bank (FNB) Home Loans Jan Kleynhans confirmed that the bank was restructuring its sales department.

"At the moment we have just taken the first steps by advising [about] 90 people who may be affected. FNB Home Loans has nearly 1 000 employees.

Saturday Open Thread: FNB - 'It's not getting better'

Welcome to the Saturday Open Thread. This weeks topic starter from FNB:

With houses turning in sub-inflation growth, sellers should look at pricing their houses more realistically, while buyers are becoming increasingly more professional in their buying decisions.

Current high debt to disposable income levels place owners under pressure to service their mortgage obligations. The sector will remain stressed and the need to downscale will continue, especially where we have seen income and job losses.

FNB: Prices Are Still Weakening

The Times reports:

Average house price growth has continued to slow, according to the November FNB House Price Index released on Wednesday.

"The average house price growth slowdown continues, with the November FNB House Price Index recording a year-on-year rate of increase of 3.8 percent," said John Loos, FNB Home Loans strategist, in a statement.

Here's a lovely little snippet from later on

Loos warned that long term, a high household debt-to-disposable income ratio would hold back the residential housing market. In the second quarter of 2010, this ratio was 78 percent.

Payment on debt still accounts for nearly 80% of disposable income. That is horrendous.

House Price Drop Officially Hits -10%

House prices continue to deteriorate

The steady deterioration in house prices continued in April, according to FNB's House Price Index released on Monday.

This was a result of a sizeable oversupply that had built-up in the residential market.

The number of owners trying to sell houses due to financial pressure was a key driver of the oversupply.

According to property economist John Loos, the April FNB House Price Index had reached double-digit year-on-year average house price deflation for the first time, to the tune of -10,2%.

This put the average house price level back to the level at the end of 2006, Loos said.

FNB Jump On The Auction Alliance Bandwagon

Following ABSA and it's Rapid Auction Programme(RAP), FNB is now partnering with Auction Alliance in the FNB Quick Sell Programme to get repossessed homes (or if they're following ABSAs lead, forcing sellers into auction before repossession) off their books.

Thanks to reader HG for the link.

A John Loos Retrospective: 2006 - 2009

Here's some quotes from chief FNB property shill John Loos as collected by Reader Bean Counter:

"I think later in the decade towards 2008, house price inflation will start to pick up." – June 2006

“So I don't see the end of house-price inflation for the country as a whole, and I think that by about next year you could start seeing a recovery in house-price inflation after some further decline this year...I think commercial property returns are going to be excellent for the rest of the decade.” – April 2007

“I expect to see a gradual uptick in demand for residential property towards the middle of the year...I don't think one should probably wait much longer. If one's holding out for price deflation I think you're probably going to be disappointed... I don't think it's a situation where we're going to see price deflation on a significant scale.” – February 2008

“You mustn’t count residential property out, from a point of view of getting into the market. The good time to get into residential property is probably just about here, as residential is probably near the bottom of the cycle.” – September 2008

“Yes, I’m afraid the whole global crisis has gone substantially further than most of us expected - it’s taken the property downturn that started back in 2004 to worse levels, and we’re into price deflation and there’s not a lot we can do about the situation as to where we are.” -- Business Day Summit business show transcript, January 13 2009

Remember folks our pal Loos works for the bank first. What they need to hear he tells them.

FNB: Bad Debts Up 180%!

Moneyweb reports:

FirstRand reports bad debts at R4,7bn

FirstRand Ltd, South Africa's second-biggest banking group by assets, reported a 13 percent fall in full-year normalised headline earnings on Tuesday, and said credit market conditions remained challenging.

The firm, the last of the country's four big banks to report full-year results, said normalised headline earnings for the year to end June were 8.8 billion rand.

FirstRand said it had been hit by slower asset growth and higher bad debts at its retail units. Bad debts at its retail unit were at 4.7 billion rand versus 2.6 billion rand in the previous corresponding period.

FNB: Even Rental Activity Is Declining

Renting the way to go

The decline in the number of first-time home buyers has made the rental option more attractive, but people looking for homes to let are limited by affordability, say estate agents.

The FNB Residential Rental Barometer for the second quarter of 2008, released yesterday, showed a decline in activity from a rating of 8.4 to 7.6 . Agents who were polled for the national index said only 59 percent of rental properties on their books were snapped up in less than a month, compared with the 75 percent take-up recorded in the first quarter of the year — a 16 percent decline in activity.

The main reasons given for slowed activity was a 7.43 rating of landlords asking high rentals, and a 6.73 rating for the letting market being a tenants market.

Please note the sentence that I emphasised in the above quote. With the property bubble collapsing landlords (especially the recent buy-to-let crowd who have been losing thousands every month covering bonds that rentals don't pay for) have been hoping that with less property purchases there would be more demand for rental and so rentals will go up. Well as I expected the opposite has happened because in an economic downturn raising rentals, especially with reliable tenants, is a one way ticket to an empty 'investment' property.

FNB: Thank Us Later For Denying You A Bond And Losing Your Deposit

If you put down a deposit on a property and FNB reassessed your loan and denied you your bond causing you to lose your deposit, FNB says that you should thank them because in actual fact you probably were going to lose a lot more money later on:

Some home buyers could lose deposits

Kleynhans said it was possible some customers might lose their deposits on houses if they did not get the bond.

But, he said, the loss of a R30 000 or R50 000 deposit might "in the grand scheme of things" be better for the applicant than a much bigger loss if the client could not service the bond.

It was possible that if the customer was later forced to sell the property he could find himself with a shortfall of R200 000.

Let's say that R50 000 was a 10% deposit. That means the selling price was R500 000. If there's a shortfall of R200 000 then FNB are seeing a 40% nominal drop in house prices. Ouch.

FNB: We're Cancelling Approved Bonds

Here's a bit of a bombshell. FNB are going to be cancelling approved bonds on a 'large scale'. Realestateweb reports:
Home loan shocker: FNB pulls plug on property credit

Property deals are set to crumble, leaving developers, estate agents and conveyancers scramble to cover costs, as one of the biggest banks withdraws approved mortgage offers "on a large scale".

It's not just service providers who will be knocked financially: buyers and sellers with deals from other banks could find themselves high-and-dry where FNB pulls the plug on a key buyer in the chain.

FNB, one of the big four and part of the FirstRand group (JSE:FSR) listed on the JSE, confirmed to Realestateweb.co.za today that will withdraw home loan approvals "on a large scale".

FNB: Expect "National House Price Deflation"

John Loos is FNB's property strategist and has been one of the biggest rah-rah property cheerleaders during the bubble run up over the past few years. When there were signs that property market was overvalued Loos was first in line to reassure us that everything was alright and property always goes up. Well according to this report in MoneyWeb ol' Johnny is a bit less optimistic these days

FNB's property strategist John Loos, who is known for his general optimism about South African real estate, is bracing himself for "some national house price deflation"