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Questions raised over mortgage bond scheme

Loxfin and Mortgage Secured Finance are offering a 13.5% return, but it’s not clear how they generate it.

Investors in a mortgage bond scheme run out of Durbanville in Cape Town may not be getting what they signed up for. The scheme, which involves two sister companies – Loxfin and Mortgage Secured Finance (MSF) – displays a number of concerning characteristics.

Moneyweb was alerted to the companies by an investor whose financial adviser had placed nearly two thirds of her savings into the scheme. She was promised a return of 13.5% per year, with interest paid out monthly.

As she had consistently received the monthly payments, she wasn’t initially concerned about the investment itself – she was worried about the advice she had received. However, investigations by Moneyweb have revealed that there are significant gaps in the investment proposition.

The scheme

According to the investment documents, investors start the process by depositing their money into an attorney trust account managed by the firm Bornman & Hayward. That money is then made available to MSF on the basis of a loan agreement signed between itself and the investor.

MSF then loans that money on to its clients in the form of mortgage bonds. The interest earned is paid to MSF and reimbursed to the investor.

Loxfin’s role appears to be to identify suitable candidates for the bonds and ensure that they have risk cover in place to cover death, dread disease, disability or retrenchment.

Source: Mortgage Secured Finance and Loxfin (The poor quality is due to this being a scanned document.)

MSF and Loxfin share a physical address and telephone number. They also share the same two directors – Etienne de Beer and Willem van der Wyver.

The concerns

Moneyweb’s investigations into the scheme have raised a number of red flags. The first is that MSF is not an authorised credit provider. The National Credit Regulator (NCR) confirmed that the company voluntarily cancelled its registration in 2016, claiming that the business was closed.

However, Moneyweb has seen documentation pertaining to three new investments made into the scheme in the last year. If MSF is still writing mortgage bonds, it is likely in contravention of the National Credit Act.

Nthupang Magolego, senior legal advisor at the NCR, told Moneyweb that the regulator is already involved in litigation against the company on other matters.

“During the hearing at the National Consumer Tribunal in one of our litigations against them, we became aware that they are still collecting debts owed by consumers in spite of having volunteered to cancel their registration,” Magolego noted. “We will be adding this conduct as an additional contravention in our litigation against them.”

This also contradicts a claim in MSF’s documentation that: “MSF is not involved in any litigation whatsoever”.

MSF also claims that “Netcash, on instruction from MSF, collects the monthly interest and pays it over to MSF for distribution to the investor”. However, Netcash was acquired by Softline, part of the Sage group, and renamed Sage Pay more than a year ago.

Sage Pay is still making some collections, but given the concerns raised by the NCR, has indicated that it will be investigating whether it should continue to do so.


In the documentation given to investors, Loxfin also claims to be a “financial services provider”. However, its financial services provider (FSP) licence was withdrawn by the then Financial Services Board (now the Financial Sector Conduct Authority, FSCA) in 2012 “for non-compliance with the FAIS [Financial Advisory and Intermediary Services] legislative provisions pertaining to mandatory annual statutory returns and not paying their mandatory prescribed annual levies to the FSCA”.

While it is unclear exactly what Loxfin’s role is in ensuring that those receiving the mortgage bonds have adequate insurance in place, if it is providing any advice or intermediary services in relation to insurance products it would be doing so unlawfully.

Given that Loxfin and MSF are receiving loans from members of the public and lending those on to a third party, they may also be running foul of the Banks Act. Under this legislation no organisation without a banking licence may conduct the “business of a bank”, which specifically includes “the acceptance of deposits from the general public as a regular feature of business”.

Having been alerted to the issue, the South African Reserve Bank confirmed to Moneyweb that “the Prudential Authority is assessing the matter in accordance with its mandate and processes”.

The big question

It would appear that the only way that MSF and Loxfin could definitely not be contravening multiple pieces of legislation is if they are not doing what they are telling investors they are doing. That would however only raise bigger questions.

If it is misrepresenting its operations, how is it generating a return for investors? Those who have entered loan agreements with MSF are receiving monthly payments. So where is that money coming from?

Numerous emails sent by Moneyweb to De Beer and Van der Vyver requesting a response to the issues raised in this article went unanswered. A telephone message was also not replied to.

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Patric…Ecsponent with its long list of prefs need to be investigated…is the one pref funding the other pref

When will they ever learn ? Another scheme (read Scam?) on the horizon ? IF the scheme is not registered with the FSCA ( previously the FSB) and the adviser not registered anyone participating is at risk ………..let us see how quickly the FSCA acts…………………..

Yes- a fool and his no ey are soon parted. More tears from investors.

…and the financial adviser ? Should be named & shamed.

Good day friend, I just want to recommend you to a good loan company where I got my loan of $10,000.00 at the interest rate of 3% through their email when I was looking for Loan to pay my bills and move on in life then a friend gave me this company details which I contacted through this email: ( whatsapp +1(867) 322-7515

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