Are You a Victim of Securitisation Fraud?

The Commercial Crimes Unit (CCU) of the South African Police Services (SAPS) will be conducting in-depth investigations into the activities of the Big Four South African banks – Absa, Nedbank, Standard Bank and First National Bank, who are suspected of rampant securitisation fraud.

Securitisation is a bank practice, whereby the bank bundles thousands of home owners’ mortgages together and sells them to investors listed on the JSE. 

Subsequently, the Johannesburg CCU of the SAPS arranged for a meeting with Advocate (Adv.) Douglas Shaw to discuss new evidence in relation to the Big Four Banks allegedly committing serious fraud with regard to the securitisation of home loans. Adv. Shaw is to supply the SAPS with further information and a decision will then be made as to whether the Public Prosecutor should be briefed on the matter or not.

Adv. Shaw instructed a team of researchers to investigate 600 bonds and, though the banks claimed that their securitisation figures reflected 120 – 200 legally transferred home loans, researchers discovered that, in actuality, not a single of these bonds had been recorded as having a new owner. As a statistical impossibility, this finding indicates that securitisation fraud is pervasive among banks.

Adv. Shaw explained that this shows that the banks are duping the courts and home owners as to the true nature of their securitisation activities, while maintaining the impression that the home owners are still the registered bond owners, when this is in fact not the case.

In this way, the banks illegally collect mortgage bond payments on behalf of the new bond owners and take judgment against borrowers that fall into arrears. The research suggests that the banks omit the truth in court, acting as though they are still the registered owners of the mortgage bonds.

It is suspected that a lot of the securitisation instruments, traded via the JSE, are likely just ‘empty shells’, with under-reported or no underlying assets. Furthermore, the research strongly suggests that the banks habitually lie to the bondholders and withhold evidence, when they request to see proof of whether or not their bond has been securitised.

Should the case be taken to court, it will surely prove to be one of the most prevalent cases of banking fraud in South African history, as confirmed by a securitisation expert.

Adv. Shaw previously headed an investigation into the murky, secretive practice of securitisation, uncovering that, where bonds were securitised, the banks lost the legal titles to these home loans. Regardless, they would continue to illegally act as collection agents for the new owners.

These findings could provide home owners, who are at risk of losing their homes, with the necessary evidence in order to hold onto their property. The banks use the title deeds as presumed evidence that the home loan hasn’t been securitised in court. Only, it’s now clear what their ulterior motive was for doing this.

If the banks have securitised the home loans, it is illegal not to reflect the cession on the Deeds register, in favour of the new owner. As the bank can then sue the home owner in their own name, which is an act of fraud.

When asked for comment, the JSE said that they always ensure that adequate disclosure is made in respect of any securitisation scheme, but that they could not authenticate the underlying securities in the scheme. The JSE also made it clear that if they were provided with information demonstrating that there were no assets within a structure, then they would take this up with the bank concerned. However, they also stated that they did not believe this to be the case.

It is clear that the banks are consciously repossessing property 20-40% of the time, when they don’t have locus standi (the right or capacity to bring an action) to do so.

The law requires that banks must adhere to the following, when a mortgage bond is securitised:

• Inform the bondholder of the change in ownership,

• Cede (give up power) the mortgage bond to the new owner at the Deeds office, and

• Banks are prohibited from assuming the role of collection agent for the new owner.

So, if you suspect that your bank isn’t playing by the rules, request to see proof of whether or not your bond has been securitised and contact National Debt Advisors immediately, if they refuse to comply!