A King William's Town family were celebrating this weekend after they got their home back having lost it as the victims of a pyramid mortgage scheme.
A King William's Town family were celebrating this weekend after they got their home back having lost it as the victims of a pyramid mortgage scheme.
Last Friday (6 May) in the Grahamstown High Court, a judgment handed down in favour of the Tshatshu family will see ownership of their home restored to them after they unwittingly transferred ownership to a third party through a fraudulent reverse mortgage scheme. The contract concluded between the Tshatshu family and the financing scheme was also declared null and void, and set aside.
Mr and Mrs Tshatshu, represented by the Legal Resources Centre (LRC), instituted an application against Standard Bank, Dream World Investments (a company under liquidation), and their agent, Asset Management Specialists (AMS), also under liquidation, to set aside the sale and subsequent transfer of their home.
The family entered into an agreement to acquire a loan of R100 000 from Dream World Investments. AMS marketed these loan schemes particularly at people who had been blacklisted by the credit bureau and who owned property. Unbeknown to them, as security for the loan, the Tshatshus signed documents which authorised the transfer of their home to Dream World.
The Tshatshus believed they were signing documents soliciting a loan and the house was being used as security for the repayment of the loan. At no point did they know that they were selling their house. If they had been, they said, they would not have signed the documents.
To finance their purchase, Dream World then acquired a loan from Standard Bank secured by a mortgage bond on the Tshatshu home. The scheme envisaged that the Tshatshus would pay “rent” on the property and Dream World would use this to pay their monthly bond instalments to Standard Bank. In due course, Mrs Tshatshu stopped making monthly payments and Dreamworld stopped paying its bond.
In 2007, the Asset Management Specialist companies, including Dream World Investments were liquidated. The liquidators first offered the Tshatshus their home at the price of the outstanding bond, which was in excess of R600 000. The loan they had received from Dream World was R100 000. They could not afford this price and their home was sold on auction. The Tshatshus approached the LRC after they were faced with an application from the purchaser to evict them from their property.
The Tshatshus sought an order to declare the agreement concluded with Dream World invalid. They also sought an order declaring that they are entitled to restitution of the home, and for the Registrar of Deeds to register the property in their name within one month of the court order. Only Standard Bank opposed the application on the grounds that reversing the fraudulent agreement would deprive the bank of the security if the mortgage bond over the property without it having repaid the loan secured by the bond. This would leave the bank with a worthless claim against Dream World Investments.
The court declared the Tshatshu family to be the owners of the property and ordered the Registrar of Deeds to re-register the property in the name of the Tshatshu family within one month.
With regard to the conduct of Standard Bank, Judge Elna Revelas found that, “the bank has also in some measure contributed to the situation. It granted a loan to a fraudster. It did not demonstrate what criteria were relied upon to determine Dream World’s credit worthiness.”
In response to the judgement, a spokesperson from Standard Bank said, "Standard Bank is reviewing the judgment and considering its options."
