MAIN IMAGE: Vuyiswa Ramokgopa, Chairperson of the National Property Practitioners Council (NPPC)
The Property Practitioners Act (PPA) came into law with effect from 1 February 2022. Section 58 of the PPA regulates arrangements between real estate agents and service providers in the real estate value chain following the conclusion of a deed of sale. Mortgage origination is one of many such “service providers” that will include attorneys, banks, compliance certificate providers, bridging financiers, and other ancillary service providers.
Vuyiswa Ramokgopa, Chairperson of the National Property Practitioners Council (NPPC), said they, together with the origination industry, are concerned that a broad interpretation of the section could have a significant impact on arrangements that are currently common place between real estate industry and origination.
“Only attorneys are listed specifically in the section. The interpretation of s.58 is not clear and will develop over time. As these arrangements have long held significant benefits for home buyers, we believe that real estate and origination arrangements should be exempted from the application of section 58.
“Unquestionably, the partnerships between the real estate and mortgage origination industries have delivered enhanced buyer education, readily accessible pre-qualification and credit checking services, as well as multi-bank home loan submissions, thereby improving home buyers’ access to home loans in terms of turnaround times, best access to credit and the granting of the home loan itself on the most favourable terms (including interest rates), Ramokgopa said.
The increased access of home buyers to mortgage origination has driven increased competition between the banks for the home buyer’s home loan – all to the ultimate benefit of the home buyer as the end consumer.
“Given the strong pro-consumer benefits of mortgage origination, we are joining with the origination industry in applying to the new Property Practitioners Regulatory Authority (PPRA) for real estate / origination relationships to be exempted from the broadest ambit of s.58 (1)(b). In this regard, specific provision is made in the Regulations to the PPA for exemption from section 58 provided that the exemption will benefit consumers.
“We have no doubt, based on industry experience, that the pro-consumer ground are well met in this instance. On 1 February 2022, the NPPC and MORCSA (the Mortgage Origination Regulatory Council of SA) lodged an exemption application with the PPRA for a ruling that estate agents (and therefore also originators) are exempted from the application of the provisions of section 58 (1) (b) insofar as it relates to “encouraging” consumers to utilise the services of mortgage originators (including specific mortgage originators),” she said.
Pending the determination of the exemption application, the status quo will remain for the industry. This is provided for in section 41(2) of the Regulations. Accordingly, and until there is a ruling on the exemption by the Regulator (which will follow an industry wide consultation process), property practitioners may continue to enter into arrangements with mortgage originators and encourage the use of a particular mortgage originator.
Ramokgopa said the services provided by mortgage originators empower consumers and enhance their ability to access favourable pricing from banks at no cost to themselves. This is particularly important given the current landscape where first-time buyers, and particularly women under the age of 40, have been the key drivers of sales growth in the property market.
