The government’s plan to amend the Home Loan & Mortgage Disclosure Act to compel financial institutions to disclose critical information about their lending practices raises more questions than it is likely to answer.
Human settlements minister Mmamoloko Kubayi said her department had received numerous complaints from aspirant homeowners claiming their loan applications were declined due to racial profiling. Yet the department’s own data indicates an approval rate of 53% for home loan applications from people deemed to be “previously advantaged”, and 49% for those classified as “historically disadvantaged”.
That is not much of a difference, and the four percentage point gap can in any case be explained quite credibly by the lingering effects of apartheid, which deliberately made it difficult for black people — and subsequent generations — to accumulate assets or enhance their creditworthiness in other ways.
Banks are in business to make profits, and turning away potential clients for reasons of petty prejudice would soon put them out of business. But as the Banking Association SA pointed out in a terse statement, they do have a fiduciary responsibility to protect depositors’ funds, so cannot lend recklessly, and a legal obligation to ensure the personal information of their customers is kept secure.
There is much the government could do to make it easier for people to qualify for home loans, not least by removing administrative obstacles to economic growth and job creation, as well as dismantling the barriers that are preventing the construction of more affordable housing. It would be well advised to remove the log from its own eye before implying without any clear foundation that the banks are guilty of unfair discrimination.
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