JPRF-F-2023-090 — Reforming the Standard for Financing Social and Public Interest Housing

Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Government Financial Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | Resolution No. JPRF-F-2023-090 THE FINANCIAL POLICY AND REGULATION BOARD CONSIDERING: That, Article 3 of the Constitution of the Republic of Ecuador considers it a primary duty of the State to guarantee, without any discrimination, the effective enjoyment of rights; That, Article 30 of the Magna Carta provides that persons have the right to a safe and healthy habitat, and to adequate and dignified housing, regardless of their social and economic situation; That, Article 84 of the Fundamental Norm mandates that every body with normative power shall have the obligation to adapt, formally and materially, laws and other legal norms to the rights provided therein; That, Article 226 of the Constitution of the Republic of Ecuador provides that State institutions, their agencies, dependencies, public servants, and persons acting by virtue of a state power shall exercise only the competencies and faculties attributed to them in the Constitution and the law; That, Article 261 of the Supreme Norm establishes that the Central State shall have exclusive competence over housing policies; That, Article 375 of the Constitution of the Republic of Ecuador guarantees, at all levels of government, the right to habitat and dignified housing; That, Article 13 of the Organic Code of Monetary and Financial Law, Book I, creates the Financial Policy and Regulation Board as part of the Executive Function, responsible for the formulation of credit, financial, securities, insurance, and prepaid comprehensive health care service policy and regulation; That, Article 14.1, numbers 1 and 7 letter b, of the aforementioned Code, grants the Financial Policy and Regulation Board the functions of regulating the creation, constitution, organization, activities, operation, and liquidation of financial, securities, insurance, and prepaid comprehensive health care service entities; That, Article 115 of the Organic Code of Monetary and Financial Law, Book II, states that natural or legal persons, private, public, or mixed, national or foreign, or entities endowed with legal personality, may act as settlors of commercial trusts, who will transfer ownership of the assets by title of commercial trust; That, General Provision Fifteenth of the Organic Code of Monetary and Financial Law, Book II, determines that the Monetary and Financial Policy and Regulation Board, through a general provision, shall regulate the operation of trusts and their requirements in which the public sector participates; That, Article 1 of the Organic Law of Social Interest Housing establishes as its objective to establish the legal regime for the direction, planning, regulation, control, and production of a safe and healthy habitat, and of the right to adequate and dignified social interest housing in all segments;

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Government Financial Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | That, Article 27 of the aforementioned Law determines that the social production of habitat is the management and construction process of habitat and housing, intended to satisfy the housing needs of the population in poverty or vulnerability and of persons in priority attention groups; That, through Executive Decree No. 405 of April 21, 2022, published in the Third Supplement of Official Register No. 57 of May 06, 2022, the Regulation of Social and Public Interest Housing was issued, which aims to regulate the national habitat and housing plan, as well as to establish the legal regime applicable to social and public interest housing, its subsidies, and incentives; That, General Provision Fifth of the aforementioned Decree establishes that the rector of financial policy and regulation, within the framework of its competencies, shall regulate the operation and mechanisms that allow applying preferential interest rates for financial and credit products; That, through Resolution No. 502-2019-F of March 01, 2019, and its reforms issued with Resolutions No. 507-2019-F of April 03, 2019; No. 539-2019-F of August 14, 2019; and No. 562-2020-F of January 22, 2020, the Monetary and Financial Policy and Regulation Board, in functions at those dates, resolved to incorporate as Chapter XI "Standard for the financing of social and public interest housing with the participation of the public, private, popular and solidary financial sector, and entities of the non-financial public sector", in Title II "National Financial System" of Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities and Insurance Resolutions; That, by virtue of the issuance of the Organic Law of Social Interest Housing and the Regulation of Social and Public Interest Housing, it is imperative to adapt the Standard for the Financing of Social and Public Interest Housing with the Participation of the Public, Private, Popular and Solidary Financial Sector and Entities of the Non-Financial Public Sector, contained in Chapter XI "Standard for the financing of social and public interest housing with the participation of the public, private, popular and solidary financial sector, and entities of the non-financial public sector", Title II "Monetary and Financial System", Book I of the Codification of Monetary, Financial, Securities and Insurance Resolutions, issued by the Monetary and Financial Policy and Regulation Board through Resolution No. 502-2019-F, in order to facilitate its application, and incentivize the social production of habitat; That, through Letter No. MEF-MINFIN-2022-0571-O dated September 20, 2022, the Minister of Economy and Finance (S), submits to the Financial Policy and Regulation Board the Proposal for Reform of Chapter XI "Standard for the financing of social and public interest housing, private, popular and solidary, as well as entities of the non-financial public sector" of Title II "Monetary and Financial System" of Book I of the Codification of Monetary, Financial, Securities and Insurance Resolutions; That, the Technical Secretariat of the Financial Policy and Regulation Board, through Memorandum No. JPRF-ST-2023-0106-M of December 07, 2023, submits to the President of the Board the following: a. Technical Report No. JPRF-CTSF-2023-020 of December 06, 2023, which points out the need to update the secondary standard corresponding to social interest housing credit programs and public interest housing, in order to homogenize the general conditions of these credits, provide clarity and coherence to the operational processes of granting, provide sustainability to the securitization scheme, and align the secondary standard with higher-ranking norms, in line with the needs for updating the secondary standard according to initiatives driven by the central government, which seek to expand the placement of social and public interest housing credits as a solution alternative to the housing problem, which corresponds to a matter of social interest. b. Legal Report No. JPRF-CJF-2023-062 of December 06, 2023, which states that the Organic Code of Monetary and Financial Law, Book I, in its Article 14.1 number 27, provides that the Financial Policy and Regulation Board is competent to exercise the other functions, duties, and faculties assigned to it by the aforementioned Code and the law, among them, the Organic Law of Social Interest Housing. It also indicates that the Proposal for Reform of Chapter XI "Standard for the financing of social and public interest housing, private, popular and solidary, as well as entities of the non-financial public sector" and Chapter IX "Standards Regulating the Segmentation of the Credit Portfolio of Entities of the National Financial System", Title I "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities Resolutions, is legally viable in the terms contained in the aforementioned Technical Report No. JPRF-CTSF-2023-020; That, the Financial Policy and Regulation Board, in ordinary session held by technological means, convened on December 09, 2023 and carried out through video conference on December 15, 2023, reviewed the Letter No. MEF-MINFIN-2022-0571-O of September 20, 2022, sent by the Minister of Economy and Finance (S), the Memorandum No. JPRF-ST-2023-0106-M of December 07, 2023, issued by the Technical Secretariat of the Board, as well as the aforementioned reports from the Technical Coordination of Financial Sector Policy and Regulation and the Legal Coordination of Financial Policy and Norms, in addition to the draft resolution corresponding; That, the Financial Policy and Regulation Board, in ordinary session held by technological means, convened on December 09, 2023 and carried out through video conference on December 15, 2023, reviewed and approved the following Resolution; and, In exercise of its functions, RESOLVES: ARTICLE FIRST.- Substitute the second paragraph of Article 1, number 4 of Chapter IX "Standards that regulate the segmentation of the credit portfolio of entities of the National Financial System", Title II "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities and Insurance Resolutions, with the following: "For social and public interest housing credit, the following subsegments are established: a. Social Interest Housing Credit.- In the case of social interest housing, a commercial value of the housing up to 178,00 Unified Basic Salaries is considered, and other requirements established in current legal regulations. b. Public Interest Housing Credit.- In the case of public interest housing, a commercial value of the housing from 178,01 to 229,00 Unified Basic Salaries is considered, and other requirements established in current legal regulations."

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Government Financial Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | ARTICLE SECOND.- Renumber the General Provisions of Chapter IX "Standards that regulate the segmentation of the credit portfolio of entities of the National Financial System", Title II "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities and Insurance Resolutions. ARTICLE THIRD.- Incorporate as General Provision Seventh in Chapter IX "Standards that regulate the segmentation of the credit portfolio of entities of the National Financial System", Title II "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities and Insurance Resolutions, the following: "SEVENTH.- Cases of doubt that arise in the application of this Chapter shall be resolved by the Superintendency of Banks and the Superintendency of Popular and Solidary Economy, as appropriate." ARTICLE FOURTH.- In the second paragraph of the unnumbered article following Article 2 of Chapter XI "Standard for the financing of social and public interest housing with the participation of the public, private, popular and solidary financial sector and entities of the non-financial public sector", Title II "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities and Insurance Resolutions, substitute the phrase "The value of social interest housing will be up to 177.66 Unified Basic Salaries (UBS)." with the following: "The value of social interest housing will be up to 178.00 Unified Basic Salaries (UBS)." ARTICLE FIFTH.- In the third paragraph of the unnumbered article following Article 2 of Chapter XI "Standard for the financing of social and public interest housing with the participation of the public, private, popular and solidary financial sector and entities of the non-financial public sector", Title II "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities and Insurance Resolutions, substitute the phrase "The value range of public interest housing goes from 177.66 UBS to 228.42 UBS." with the following: "The value range of public interest housing goes from 178.01 UBS to 229.00 UBS". ARTICLE SIXTH.- In the first paragraph of Article 3 of Chapter XI "Standard for the financing of social and public interest housing with the participation of the public, private, popular and solidary financial sector and entities of the non-financial public sector", Title II "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities and Insurance Resolutions, substitute the phrase "In the case of social interest housing, a commercial value of up to 177.66 Unified Basic Salaries is considered; and, for public interest housing from 177.67 to 228.42 Unified Basic Salaries", with the following: "In the case of social interest housing, a commercial value of up to 178.00 Unified Basic Salaries is considered; and, for public interest housing from 178.01 to 229.00 Unified Basic Salaries" ARTICLE SEVENTH.- Substitute Article 4 of Chapter XI "Standard for the financing of social and public interest housing with the participation of the public, private, popular and solidary financial sector and entities of the non-financial public sector", Title II "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities and Insurance Resolutions, with the following text:

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Government Financial Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | "Art. 4.- General conditions of eligible housing credits: To access the benefits, social and public interest housing credits that may be granted by entities of the Public, Private, and Popular and Solidary Financial Sectors, must observe the following conditions: For Social Interest Housing:

1. Value of the housing: up to 178.00 Unified Basic Salaries;
2. Price per Square Meter: less than or equal to 2.49 Unified Basic Salaries, for the calculation of the value per square meter, the definition established for this effect by the Superintendency of Banks will be used;
3. Down payment: at least 5% of the sale price of the property established in the Sales Contract;
4. Maximum credit amount: up to 178.00 Unified Basic Salaries, without including in said amount the expenses associated with the implementation of the operation, related to legal expenses, appraisals, insurance, and others, which may be financed in the same credit operation; provided that the total credit does not exceed the commercial appraisal of the property;
5. Term: minimum 20 (twenty) years or maximum 25 (twenty-five) years;
6. Maximum rate 4.99% effective annual, adjustable or fixed;
7. Dividend payment periodicity: monthly;
8. Type of Guarantee: first mortgage in favor of the financial entity originating the credit;
9. Grace period: there may be a grace period of up to 6 (six) months;
10. Type of Housing: completed housing;
11. Maximum monthly income of the debtor: 6.34 Unified Basic Salaries. In the case of debtors who are in an employment relationship, it corresponds to the total amount of individual or family unit gross monthly incomes. In the case of debtors who are not in an employment relationship (or independent work), the value will correspond to the net margin of the business, that is, the business income discounted by the expenses of the economic activity. For the verification of income and expenses, the criteria that the originating entity of the portfolio maintains for this effect will be used; and,
12. Certificate of qualification of social interest housing projects, issued by the regulatory body for urban development and housing. For Public Interest Housing:
13. Value of the housing: from 178.01 to 229.00 Unified Basic Salaries;
14. Price per square meter: less than or equal to 2.49 Unified Basic Salaries; for the calculation of the value per square meter of construction, the completed housing will be considered, that is, it includes finishes, basic services, and minimum security. For the calculation of the value per square meter, the definition established for this effect by the Superintendency of Banks will be used;

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Government Financial Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | 3. Down payment: at least 5% of the sale price of the property established in the Sales Contract; 4. Maximum credit amount: up to 229.00 Unified Basic Salaries, without including in said amount the expenses associated with the implementation of the operation, related to legal expenses, appraisals, insurance, and others, which may be financed in the same credit operation; provided that the total credit does not exceed the commercial appraisal of the property; 5. Term: minimum 20 (twenty) or maximum 25 (twenty-five) years; 6. Maximum rate 4.99% effective annual, adjustable or fixed; 7. Dividend payment periodicity: monthly; 8. Type of Guarantee: first mortgage in favor of the financial entity originating the credit; 9. Grace period: there may be a grace period of up to 6 (six) months; 10. Type of Housing: completed housing; 11. Maximum monthly income of the debtor: 6.34 Unified Basic Salaries. In the case of debtors who are in an employment relationship, it corresponds to the total amount of individual or family unit gross monthly incomes. In the case of debtors who are not in an employment relationship (or independent work), the value will correspond to the net margin of the business, that is, the business income discounted by the expenses of the economic activity. For the verification of income and expenses, the criteria that the originating entity of the portfolio maintains for this effect will be used; and, 12. Registration of VIP Project." ARTICLE EIGHTH.- In Article 5 of Chapter XI "Standard for the financing of social and public interest housing with the participation of the public, private, popular and solidary financial sector and entities of the non-financial public sector", Title II "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities and Insurance Resolutions, after the phrase "National Financial Corporation B.P", incorporate the following text: "or by an entity authorized for this effect, in accordance with current regulations," ARTICLE NINTH.- Incorporate in Article 6 of Chapter XI "Standard for the financing of social and public interest housing with the participation of the public, private, popular and solidary financial sector and entities of the non-financial public sector", Title II "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities and Insurance Resolutions, the following final paragraph: "In each securitization trust, a maximum of 5% of the portfolio of the total portfolio at the end of the accumulation stage, with a grace period, will be allowed."

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Government Financial Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | ARTICLE TENTH.- Substitute letter h), number 2, of Article 7, Chapter XI "Standard for the financing of social and public interest housing with the participation of the public, private, popular and solidary financial sector and entities of the non-financial public sector", Title II "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities and Insurance Resolutions, with the following: "h. Maturity: Up to 30 years term". ARTICLE ELEVENTH.- Substitute the text of the first paragraph of Article 15 of Chapter XI "Standard for the financing of social and public interest housing with the participation of the public, private, popular and solidary financial sector and entities of the non-financial public sector" which is in Title II "National Financial System", of Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities and Insurance Resolutions, with the following: "For purposes of application, both of this Resolution, as well as for the application of the First Transitional Provision of this standard, the delimitation of habitability conditions in housing; as well as the qualification of habitability; will be subject to what is provided in article 80 of the Organic Law on Territorial Ordering, Land Use and Management and articles 56 and 57 of the Regulation to the Organic Law on Territorial Ordering, Land Use and Management, issued through Executive Decree No. 680 of February 25, 2019." ARTICLE TWELFTH.- Substitute the General Provision of Chapter XI "Standard for the financing of social and public interest housing with the participation of the public, private, popular and solidary financial sector and entities of the non-financial public sector", Title II "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities and Insurance Resolutions, with the following text: "GENERAL PROVISIONS FIRST.- Entities of the National Financial System, that grant credit under the "Standard for the financing of social and public interest housing with the participation of the public, private, popular and solidary financial sector and entities of the non-financial public sector";

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Government Financial Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | " will be subject to the provisions of this Resolution. The entities must ensure that the credits granted comply with the conditions established herein. The Superintendency of Banks and the Superintendency of Popular and Solidary Economy will be responsible for the supervision and control of the compliance of these conditions by the financial entities. SECOND.- The provisions of this Resolution are mandatory for all entities of the National Financial System that grant credits for social and public interest housing. Any deviation from the conditions established herein will be subject to the sanctions provided for in the legal and regulatory framework. THIRD.- This Resolution enters into force upon its publication in the Official Register." ARTICLE THIRTEENTH.- Communicate this Resolution to the Superintendency of Banks, the Superintendency of Popular and Solidary Economy, the Ministry of Economy and Finance, and the Ministry of Housing and Land Use, for their respective purposes. ARTICLE FOURTEENTH.- This Resolution is subject to publication in the Official Register. Given in the city of Quito, on December 15, 2023.

[Signature] President of the Financial Policy and Regulation Board

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Government Financial Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador |