This unpleasant situation endangers their credit records leaving the property investor or homeowner stuck, panicked and very emotional about the situation.

There are however a few solutions that come from the most unexpected place – the banks.

Even though the banks can be harsh and procedural and have deep pockets to easily and swiftly take legal action, it is also in their best interest to solve their costumers’ problems. It costs the bank money to take legal action and repossess a property, not to mention the time, which in corporate terms equals money.

Though more properties in execution are on the banks’ lists and some people have not found solutions, we hope that this article will give some ideas on how to go about getting help from the lenders themselves.

One may find that the banks are willing to help some bond holders who are experiencing temporary financial problems. Above all, property investors and homeowners must remember that the banks are fully aware of the fact that rising interest rates have a negative impact on repayments.

But it is not that easy to get help from the bank. Many factors need to be taken into consideration, including factors that are part of the willingness profile of the borrower. The bank's job is to keep the bank in business and will not extend help to just anyone asking for help, instead they would rather evaluate each case on its merits.

Before we dive into some solutions that the banks may provide, let us look at some guidelines that one needs to remember if approaching the bank for help:

• The borrower should contact the bank as soon as they see a problem. The issue here is simple. Most borrowers wait far too long before acting on a problem or even informing the bank that a problem exists. This is true for all credit forms not only mortgage bonds.

  There are two main reasons for this purely emotional response:

  1. Borrowers are afraid to approach the bank. The bank is big and powerful and seems non-emotional and very threatening. When faced with this fear, one always must remember that humans work in the banks, not monsters or aliens. When talking to a bank, one is actually talking to a person. Though not all people are nice, most will empathize, as they are also human.

  2. Living in denial. This is the worst possible reason as no one can help a person that does not believe a problem exists. In this case, it is very likely that the borrower may be repossessed before realising what is happening.

• The borrower should show willingness to find solutions to their problem. In other words, when calling the bank, screaming and yelling doesn’t help. It is not their fault you are in this situation. If you are frustrated, you must be emotionally intelligent enough to be nice and polite and kick your punching bag afterwards to let your frustrations out.

It is very important to remember the points above before even looking at the solutions that the banks may be able to extend. If the borrower manages to upset people at the bank, they won’t even get to a person willing to help, which could make things even worse.

How might the bank be willing to help a financially struggling property investor or homeowner if the case merits such help?

When a borrower falls behind on payments each bank has certain procedures, however most of them are similar in nature and each case will be evaluated on merit.

All the banks have something called a Collection and Recoveries Department and a Customer Debt Managing Department. Some also call these Voluntary Restructuring or Loan Modification or Moratorium.

If the borrower falls in arrears the bank might follow the following procedure:

1. Pre Legal Section: If up to about six payments are outstanding the bank will phone to attain a promise from the borrower to pay and arrangements can be made. If these arrangements are broken three times in a row, the bank will hand the case to another department that some call ICU. Yes, like at the hospital. The borrower will be called again and be given about 30 days to rectify his or her promises. If nothing happens, it is over to the legal department.

2. Legal Department: This is where the borrower will get the option to sign a Power of Attorney to the bank to market or sell his property through listed agents or he or she can arrange to list the property independently.

1. Extension of the loan term from, say, 20 to 30 years. This is not favourable for homeowners at all, because the savings are not really that much compared to the additional interest. The opposite may be true for a property investor that receives rental income. This option can spell “heaven” as the interest is paid by the income received and the cash flow improves. Many investors choose this option regardless of any financial difficulties, just to boost their cash flow.

2. The borrower must ask or apply for a ‘breather period’ (this is often called ‘holiday’) and it entails no payment for a period of three to six months. The period would depend on the borrower’s profile.

3. The borrower also has the option of asking for a reduction in payment, usually not less than 50 percent but it is negotiable.

To conclude, call the bank and explain the situation in detail. They will offer some options based on your personal profile. But remember, the borrower has to call the bank, not any other third party.

It is a drawn out process and you can be sure that once a property is being auctioned the bank has probably tried everything and exhausted all possibilities.

Many people listen to “hearsay”. They have either heard or been close to a person that has had a run in with a bank and lost their home. As a result of this they have already judged the bank and hold a perception that the bank is the problem and the enemy. For such people, it is in their best interest to put such stories and perceptions aside. Each case is judged individually on its merits and it is worthwhile to give the bank the benefit of the doubt and work with them. Your case always stands a good chance of having a completely different and perhaps better outcome than those you have heard of.

Source: www.PropertyInvestorNetwork.co.za