Circular LISOL 1-183, OPRAC 1-421: Mortgage Loans on Housing and Pledge Loans on Motor Vehicles. Adjustment of Origination and Administration Manuals

BANCO CENTRAL DE LA REPUBLICA ARGENTINA
COMMUNICATION "A" 2677 20/03/98
TO FINANCIAL ENTITIES:
Ref.: Circular LISOL 1-183.
OPRAC 1-421. Loans with mortgage guarantee on housing and pledge guarantee on motor vehicles. Adjustment of origination and administration manuals.

We address you to bring to your knowledge that this Institution adopted the following resolution:

"1. Substitute in the Manual of Origination and Administration of mortgage loans (Annex I to Communication "A" 2563), the aspects indicated in each case:

1.1. Section I.:
a) Destination of the Real Estate Loan.
Fourth paragraph. (page 3):
"In the case of refinancing, the maximum amount will be the capital balance of the loan being refinanced plus the refinancing costs, if any. In the case of being a higher amount, it will be considered as destination (g) or (h) depending on the case." Fifth paragraph. (page 3):
"Those properties that, having housing as their main destination, have a commercial and/or professional space may be subject to the Real Estate Loans surprised in this manual. When determining the appraisal value of said properties, the additional commercial value, if any, to the value corresponding to the residential part used as housing must not be considered (a detailed description of the appraisal procedure is found in the Appraisal Manual)."

b) Computable Income of Applicants:
Employees in an Employment Relationship (page 4):

"Salary and Complementary Annual Salary, Commissions (monthly average of the last twelve months) Bonuses (monthly average of the last twelve months) Income from rents (monthly average of the last twelve months) Entities must verify the employment of Applicants during the last year preceding the mortgage application."

Self-Employed (page 4) (Text according to Communication "A" 2645) "Income arising from Tax Returns filed with the D.G.I. (monthly average of the last year).
Income from rents (monthly average of the last year).
Applicants must present the supporting documentation for declared incomes in accordance with current regulations."

Sixth paragraph:
"It is fundamental to evaluate the perspective of continuity of the computable income of applicants."

c) Characteristics of the Estate. (First paragraph) (page 7):
"For the purpose of evaluating the degree of solvency of Applicants, not only the composition of their estate must be considered, but also the declared debts and the payment commitments derived from them."

d) Life Insurance. Item (d), section 1) (page 8):
(d) That it be issued by:
"1) local insurance companies that have an 'A' rating granted by any of the risk assessment companies registered in the registry of the National Securities and Reinsurance Commission in local insurance companies or abroad, that have that level of rating assigned by a national or international risk assessment company."

e) Property Damage Insurance. Item (d), section 1) (page 9):
(d) That it be issued by:
"1) local insurance companies that have an 'A' rating granted by any of the risk assessment companies registered in the registry of the National Securities and Reinsurance Commission in local insurance companies or abroad, that have that level of rating assigned by a national or international risk assessment company."

1.2. Section II.:
a) Loan Application: (page 10)
First paragraph:
"Applicants must complete and sign an application that must contain as a minimum the information described in the form added as Annex I to this Section."

Second paragraph:
"The originating financial entity must have all the necessary supporting documentation for the verification of the content of the application. This will include, as a minimum, the following elements:

Regarding the identity of Applicants (page 10) "copy of the identity document (DNI/ LC/ LE/ CI, passport or others, as appropriate, according to what is established in Chapter XIII of Circular RUNOR -1)."

Employment information of Applicants (page 10) In an employment relationship "copy of the salary slips used for income calculation or certification of benefits, seniority and employment with employer's signature, certified by a banking entity or obtained directly by the financial entity and copy of the CUIL."

• name of the entity;
• data of the Applicants;
• data of the property;
• loan amount;
• repayment term;
• rate, indicating variable or fixed, moment of rate fixation (at the time of the loan application, its approval or the delivery of the loan);
• installments, detailing capital and interests, periodicity, adjustable or fixed installments; for loans with variable installments:

1. initial interest rate,
2. adjustment period, index and financial margin,
3. time of advance notice of installment modification,
4. rate increase caps (periodic and total),
5. in the case of being able to convert variable installments to fixed: moment, price, index used, margin;

• early payments and reserve funds;
• approximate amount of notary expenses:

1. registration in the Property Registry,
2. Notaries College,
3. statistics right Notaries College,
4. registration pages,
5. matrix stamp pages,
6. testimony,
7. notary fees,
8. municipal taxes;

• liquidation expenses:

1. commission,
2. request,
3. credit report,
4. cadastral survey,
5. real estate commission,
6. appraisal,
7. surveying;

• any other loan processing expense;
• surcharge for early cancellation;
• mechanism for prepayment admitted, conditions and expenses;
• delay in disbursement from the formalization of the loan.
  In all items that imply expenses, it will be clearly stated who will bear them (the entity or the Applicants) and at what moment these expenses must be integrated.
  In cases where the amount of an item is not known with certainty, an estimate will be noted.

b) Administration Folder (attached to the Client File, Communication "A" 2216):
"The administrator must keep an Administration Folder in which to store:
(a) All communications sent to Applicants or received from them.
(b) All documentation related to the loan that originates after its disbursement, such as contractual modifications.
(c) Updated Appraisal Reports, if any.
(d) Work certificates, if applicable.
(e) Documentation related to default, execution and auction.
(f) Loan cancellation documentation.
(g) Any other element, including the call log, that is considered relevant at the discretion of the entity.

c) Installment Collections (page 17):
"(a) With a reasonable advance to the installment due date, inform debtors of the amount thereof, due date, applicable interest rate (for variable loans), additional amounts to the pure capital and interest installment to be paid and any other data tending to supply the debtor with all the necessary information. (b) Receive and impute payments made by debtors."

d) Administration and monitoring of payment delays (page 18):
"(d) All administration tasks regarding the monitoring of delays must be fully documented and safeguarded in the Administration Folder or in magnetic media."

1.4. Section IV.:

Generalities (page 20):
"(a) Reference information, which describes the general characteristics of the loan."

2. Suppress in the Manual of Origination and Administration of mortgage loans (Annex I to Communication "A" 2563), the aspects indicated in each case:

2.1. Section I.:
a) Computable Income of Applicants (page 5): penultimate and last paragraphs. b) Credit Verifications Approval: (page 11): item (c)

2.2. Section II.:
Legal Folder (attached to the Client File, Communication "A" 2216): item (d) (page 14).

2.3. Section III.:
Other Tasks of the Administrator:
item (e) (page 17). item (k) (page 18).

3. Incorporate in the credit contract with mortgage guarantee the following clause:
   "V. At this moment the DEBTOR declares to know the terms and expenses that were previously informed to him under the name 'Loan Schedule.'"

4. Substitute in the Manual of Origination and Administration of pledge loans (Annex to Communication "A" 2586), the aspects indicated in each case:

a) Life Insurance. Item (d), section 1) (page 7):
(d) That it be issued by:
"1) local insurance companies that have an 'A' rating granted by any of the risk assessment companies registered in the registry of the National Securities and Reinsurance Commission in local insurance companies or abroad, that have that level of rating assigned by a national or international risk assessment company."

b) Motor Vehicle Damage Insurance. Item (d), section 1) (page 7):
(d) That it be issued by:
"1) local insurance companies that have an 'A' rating granted by any of the risk assessment companies registered in the registry of the National Securities and Reinsurance Commission in local insurance companies or abroad, that have that level of rating assigned by a national or international risk assessment company."

We accompany you the ordered texts of the origination and administration manuals for real estate loans on housing and pledge loans on motor vehicles that replace those previously made known by Communications "A" 2563 and 2586, respectively.

We salute you very attentively.
BANCO CENTRAL DE LA REPUBLICA ARGENTINA
Juan Carlos Isi Alfredo A. Besio
Deputy Manager of Standards Manager of Standards for Financial Entities for Financial Entities

ANNEX

B.C.R.A. STANDARDIZATION OF PLEDGE LOANS
ON MOTOR VEHICLES
ANNEX
TO COM.
"A" 2586
(TEXT ACCORDING TO COM.
"A" 2677)
MANUAL OF ORIGIN AND ADMINISTRATION
OF PLEDGE LOANS ON MOTOR VEHICLES

Introduction and Objectives
This Manual establishes a set of guidelines, practices and procedures that financial entities must follow in the origination and administration of loans to individuals, with first-degree pledge guarantee on new automobiles or light utility vehicles. For the purposes of this document, those loans that meet the detailed characteristics will be called "Motor Vehicle Pledge Loans". This Manual is organized into four sections:
I. Characteristics and Guidelines for the Granting of Motor Vehicle Pledge Loans
II. Origination of Motor Vehicle Pledge Loans
III. Administration Procedures
IV. Information Systems
Section I develops the general concepts related to the granting of Motor Vehicle Pledge Loans, such as the characteristics of Applicants and loan modalities. In Section II, the different steps and procedures for origination are detailed, from the Loan Application to its granting. Section III deals with aspects related to the administration of Loans, that is, once they have been originated and instrumented. Finally, Section IV specifies the information and statistics requirements that entities must maintain regarding the portfolio.
The Origination and Administration Manual must be available to Applicants at the entities.

Section I. Characteristics and Guidelines for the Granting of Motor Vehicle Pledge Loans
Debtor, Co-Debtor and Guarantor Requirements
The following enumeration of requirements is applicable to the Debtor, Co-Debtor(s) and Guarantor(s) of a Motor Vehicle Pledge Loan, who collectively are called "Applicants".
The debtor is understood as the credit taker. In the case of more than one debtor, all of them collectively will be called co-debtors. Co-debtors must assume their obligation jointly. The requirements that Applicants must meet are:
(a) Be natural persons, of legal age or civilly emancipated and authorized to conduct commerce.
(b) Be fully authorized to conduct financial transactions, that is, not be disqualified for any reason by a competent authority.
(c) There must be no pending lawsuits or judicial causes, which in the opinion of the entity are significant, against any of the Applicants.
(d) There is no maximum age limit, except that which arises from life insurance requirements.
(e) Applicants must meet the requirements required by life insurance.
(f) As a general criterion, they should not have negative commercial or credit records, unless in the opinion of the financial entity they are not relevant.

Destination of the Motor Vehicle Pledge Loan
To be considered a Motor Vehicle Pledge Loan, the destination of the funds must be one of the following or a combination thereof:
(a) acquisition of new motor vehicles for personal use; (b) acquisition of new motor vehicles for rental; (c) acquisition of new motor vehicles for other commercial use; (d) refinancing of loans whose destination was the acquisition of new motor vehicles for personal use; (e) refinancing of loans whose destination was the acquisition of new motor vehicles for rental;

(f) refinancing of loans whose destination was the acquisition of new motor vehicles for other commercial use.
A new motor vehicle is understood as the unit that has not been subject to patenting up to the moment.
In the case of refinancing, the maximum amount will be the capital balance of the loan being refinanced plus the refinancing costs, if any. In the case of being a higher amount, it will be considered as destination (a) or (b), as appropriate. Refinancing implies that the existing loan is cancelled and a new one is created.

Types of Motor Vehicle Pledge Loans
Motor Vehicle Pledge Loans may be granted in pesos or foreign currency under any of the following typologies:
(a) French System at fixed rate (according to Section 10. of the ordered text of the norms on minimum liquidity requirements.).
(b) French System at variable rate.
(c) German System at fixed rate.
(d) German System at variable rate.
(e) Other amortization systems.
French System is that which has fixed and equal periodic installments of capital and interests, with the capital portion increasing and interests decreasing. German System is that with decreasing periodic installments, with the capital portion fixed and the interest portion decreasing. The periodicity of the installment cannot be higher than semi-annual. In all cases, interests will be calculated on the basis of a year of 12 months of 30 days each. Rates will be fixed or variable according to what is established in Communications "A" 2147 and 2390. Motor Vehicle Pledge Loans at variable rate may include an agreement on a maximum ("Cap.") or a minimum ("floor") or both ("collar") on the interest rate accruing on the loan.

Term
Loans will be granted, as a maximum, for 5 years.

Computable Income of Applicants
These are the demonstrable, usual and permanent income of Applicants. The following will be considered as computable income of Applicants those that come from:

Employees in an Employment Relationship
Salary and Complementary Annual Salary
Commissions (monthly average of the last twelve months) Bonuses (monthly average of the last two years) Income from rents (monthly average of the last two years) Entities must verify the employment of Applicants during the last year preceding the pledge application.

Self-Employed Workers
Income arising from Tax Returns filed with the DGI Income from rents (monthly average of the last two years) Applicants must present the supporting documentation for declared incomes in accordance with current regulations. Income from rents will be demonstrated by the corresponding Sworn Declaration to the General Tax Directorate. Entities may use another definition of computable income, in which case they will also obtain a modified version of the ratios defined later in this manual. However, they cannot thereby cease to calculate and register the standard concepts as defined by this manual.

Installment/Income Ratio
This is the percentage relationship that exists between the total amount of the installment of the Motor Vehicle Pledge Loan - including all concepts of capital, interests, expenses, commissions, insurance premiums and taxes - and the computable income of Applicants. For the purpose of calculation, the installment amount will be monthlyized when the payment periodicity is bimonthly, quarterly, etc. Similarly, the computable income with a periodicity different from monthly will be treated. The calculation of computable income will be the sum of net incomes (after taxes and other legal deductions). In the case of self-employed workers, special attention must be paid to computing the income of the Applicant and not the income of the activity carried out by the Applicant. For example, if the Applicant is a partner of a company that operates a business, the tax returns of the Applicant must be considered, not those of the company. To compute net incomes, amounts paid by the Applicant for national, provincial or municipal taxes that tax the declared incomes, as well as social security contributions, must be deducted.

For the purpose of calculating the total installment of the Motor Vehicle Pledge Loan, in addition to adding the amounts corresponding to capital, interests, expenses, commissions, insurance premiums and taxes, the following guidelines must be followed:
a) In the French System at fixed rate, the installment will be calculated using said rate. b) In the French System at variable rate, the installment will be calculated with the initial rate increased by 25% (for example, if the initial rate is 10%, 12.50% will be used). If a maximum rate is established, that maximum rate will be used. c) In the German System at fixed rate, the average of the installments corresponding to the first 25% of the loan term will be used. d) In the German System at variable rate, the average of the installments corresponding to the first 25% of the loan term will be used, which will be calculated with the initial rate increased by 25% (for example, if the initial rate is 10%, 12.50% will be used). If a maximum rate is established, that maximum rate will be used. e) When other amortization systems are used, the financial entity will use the methodology it considers appropriate, which must be justified and reflected in the information systems. Similar criteria to those described in points (a) to (d) above will be used, to the extent applicable.

In all cases, the formula to be used for the calculation of the ratio, which will be expressed in percentage, is:
Total Installment
X 100
Computable Income

Loan Amount / Asset Value Ratio
This is the percentage relationship that exists between the agreed loan amount and the value of the motor vehicle as it arises from the sales price agreed with the seller or from the price lists of terminals/importers and/or specialized publications, the lowest of them. The formula to be used for the calculation of the ratio, which will be expressed in percentage, is:
Amount
X 100
Value of the motor vehicle

Total Installments / Income Ratio
It is defined as the percentage relationship, on the computable income of Applicants, of the sum of periodic payments or installments that Applicants are obligated to pay for financial debts, for example: mortgages, personal loans, motor vehicles or credit cards. Payments include capital, interests, expenses, commissions, premiums and taxes. For credit cards or purchases, it is suggested to take 10% of the average balance of the last 10 months. The calculation formula will be:
Total Installments
X 100
Computable Income

Characteristics of the Estate
For the purpose of evaluating the degree of solvency of Applicants, not only the composition of their estate must be considered, but also the declared debts and the payment commitments derived from them. The basic information to consider comprises the composition of the estate and banking and commercial data. The result of said analysis must be reflected in the Approval and Analysis Form.

Prepayments
Motor Vehicle Pledge Loans will always be fully prepayable, under certain established conditions (penalties, expenses). Regarding partial prepayments, Motor Vehicle Pledge Loans may be:
(a) not partially prepayable;
(b) partially prepayable under certain established conditions (penalties, expenses).
Prepayment may apply to (i) reduction of terms maintaining the installment; or (ii) reduction of installment maintaining the terms; or (iii) a combination of the above.
Information systems must register the allowed prepayment modality.

Life Insurance
It is a requirement that at least one of the Applicants is covered by a life insurance that meets, at a minimum, the following conditions:
(a) That it covers the Applicant for the entire life of the Motor Vehicle Pledge Loan.

(b) That the covered amount be equal to the unpaid balance at all times of the Motor Pledge Loan and that in the event of a claim, it be cancelatory thereof.

(c) That the policy be issued or endorable in favor of the financial entity or of whoever may become the creditor of the Motor Pledge Loan in the future.

(d) That it be issued by:

1. local insurance companies that have an "A" rating granted by any of the risk assessment companies registered in the registry of the National Securities and Reinsurance Commission for local insurance companies or those from abroad, that have that level of rating assigned by a national or international risk assessment company, or

2. local branches of foreign insurance companies that have an "A" rating granted by any of the international risk assessment companies, or

3. local subsidiaries of foreign insurance companies to the extent that the following conditions regarding the controlling company are met: (i) it has the rating cited in the preceding point 2) and (ii) it has explicitly guaranteed the obligations of the subsidiary.

In the event that there is more than one Applicant, any of the following alternatives may be used:

(a) At least one of the Applicants will be insured for the entire unpaid balance of the Motor Pledge Loan.

(b) Each Applicant will be insured for a portion of the unpaid balance based on their contribution to the computable income of the group.

In addition to life coverage, coverage for disability or unemployment may be obtained, following the guidelines established above.

Insurance for Damage to the Vehicle

It is a requirement that the vehicle be covered by a damage insurance policy that meets, at a minimum, the following characteristics:

(a) That it covers the vehicle during the entire life of the Motor Pledge Loan for the risks of theft, robbery, fire, civil liability, and total destruction.

(b) That the covered amount be equal to the unpaid balance at all times of the Motor Pledge Loan and that in the event of a claim, it be cancelatory thereof if the destruction is total.

(c) That the policy be issued or endorable in favor of the financial entity or of whoever may become the creditor of the Motor Pledge Loan in the future.

(d) That it be issued by:

1. local insurance companies that have an "A" rating granted by any of the risk assessment companies registered in the registry of the National Securities and Reinsurance Commission for local insurance companies or those from abroad, that have that level of rating assigned by a national or international risk assessment company, or

2. local branches of foreign insurance companies that have an "A" rating granted by any of the international risk assessment companies, or

3. local subsidiaries of foreign insurance companies to the extent that the following conditions regarding the controlling company are met: (i) it has the rating cited in the preceding point 2) and (ii) it has explicitly guaranteed the obligations of the subsidiary.

Pledge Guarantee

Motor Pledge Loans must be secured by a first-degree pledge on automobiles or utility vehicles with a load capacity of up to 1,500 kg, according to the form usable for this purpose and the approved contract model.

Section II. Origination of Motor Pledge Loans

Origination Process

The origination process of Motor Pledge Loans can be summarized as follows:

(i) Submission by Applicants of the Loan Application.

(ii) Obtaining Commercial Reports.

(iii) Verification and Credit Analysis Credit Approval.

(iv) Instrumentation and Disbursement.

In this Section, each of the steps of the origination process will be analyzed.

Loan Application

Applicants must complete and sign an application that must contain, at a minimum, the information described in the form attached as Annex I to this Section.

Applicants must present all necessary supporting documentation to verify the content thereof. This will include, at a minimum, the following elements:

Regarding the Identity of the Applicants

photocopy of the identity document (DNI/ LC/ LE/ Cl, passport or others, as applicable, according to what is established in Chapter XIII of Circular RUNOR -1)

Employment Information of the Applicants

In an employment relationship

• photocopy of pay stubs used to calculate income or
• certification of benefits, seniority, and employment with the employer's signature, certified by a banking entity or obtained directly by the financial entity and
• photocopy of the CUIL.

Self-Employed

• photocopy of the license, professional registration, or municipal permit or registration in the Gross Income Tax,
• last annual declaration of the Income Tax and/or Value Added Tax and/or Gross Income Tax.

Commercial Reports

The financial entity must request a commercial or credit report for each Applicant from a reputable information company, at the discretion of the originating financial entity. This requirement may be exempted if the entity has historical customer information that provides sufficient background.

As a general principle, Applicants with negative records will not be accepted, unless, at the discretion of the financial entity, such records lack current relevance, either due to the time elapsed or the characteristics thereof.

Credit Verification Approval

The financial entity must evaluate the current and potential economic/financial capacity of the Applicants to generate resources that allow them to meet credit commitments in a timely manner. This involves evaluating both the intention and the capacity to pay of the Applicants.

The financial entity must verify the following circumstances:

(a) That the Applicants meet the established requirements.

(b) That the computable income has been verified with the presented documentation.

(c) That the commercial reports are satisfactory.

(d) That the entity's own credit guidelines are met.

Such verification will be recorded in an approval and analysis form that, at a minimum, contains the information contained in Annex II to this Section.

Credit File (attached to the Customer File established by Communication "A" 2216)

After completing the previous steps, a Credit File will be created containing, at a minimum (in the same order and clearly distinguishing the sections):

1st Section Loan Application (one for each holder). Approval and analysis form, signed by the acting official or responsible for the evaluation.

2nd Section Copy of the documentation that accredits:

• the identity of the Applicants (see "Loan Application");
• the employment information of the Applicants (see "Loan Application");
• sworn statement by the Applicants regarding the destination of the vehicle (see "Destination of the Motor Pledge Loan");
• asset certification, if applicable;
• certification of balances owed to existing pledge creditor (only for refinancing destination).

3rd Section Confidential reports for use in the market, if applicable; Commercial and bank reports, if applicable;

4th Section Procedures and calculations that support the report prepared by the analyst. Insurance Forms.

5th Section Any other documentation that the financial entity deems convenient.

The copy of all detailed documentation must be checked against the corresponding originals.

A model credit contract for a pledge loan must be delivered to the Applicant when informing about the granting of the credit.

No expenses not provided for in the pledge loan credit contract may be charged to the debtor in relation to the pledge loan.

Instrumentation and Disbursement

After the credit analysis, approval by the financial entity of the loan granting, and acceptance of the conditions by the Applicants, the instrumentation and disbursement of the Motor Pledge Loan will proceed using the established model contract, the content of which must be interpreted as the minimum text accepted by the Central Bank.

Legal File (attached to the Customer File, Communication "A" 2216)

After disbursement, a legal file must be created (it may also be a section of the credit file) containing, at a minimum, the following documentation:

(a) Credit contract with pledge guarantee, duly registered in the respective records,

(b) Life and damage insurance policies (disability and unemployment, if any), duly endorsed in favor of the pledge creditor.

The annexes to the Customer File may be physically separated as long as what is provided by Communication "A" 2216 is met.

Audits and Quality Control

It is the obligation of each financial entity to implement a quality control system neutral and independent of the origination procedures, which may be carried out jointly with Internal Audit by personnel who do not participate in the origination, approval, or administration functions of Motor Pledge Loans.

The objective of quality control is to ensure that the established procedures have been applied correctly and that the originated loans meet the relevant requirements and approvals. The quality control system must provide: a) the detection of discrepancies between actual and established procedures and b) the taking of corrective measures quickly.

Quality control must include the review of a statistically reliable sample of loans, the size of which must be a function of the total volume of Motor Pledge Loans and risk levels. Within the sample, the following must be performed:

(a) the review of credit and legal files, verification of the existence and accuracy of documentation regarding the vehicle and credit and legal aspects;

(b) the evaluation of credit decisions;

(c) the verification of the correct registration of pledge guarantees.

Quality control must be constant and permanent, with a review level that ensures statistical reliability of the sample performed.

Section III. Administration Procedures

Generalities

Once the Motor Pledge Loan has been disbursed, the originating financial entity becomes the administrator thereof. The main functions of the administrator can be summarized as follows:

(a) the collection of periodic installments of principal, interest, and other accessories (commissions, expenses, insurance premiums, taxes);

(b) the control of the use of funds according to the declared destination;

(c) maintenance of adequate records of collections;

(d) maintenance and monitoring of insurance policies (life insurance and damage insurance);

(e) processing of indemnification claims for accidents;

(f) processing of prepayments;

(g) monitoring and regularization of delinquency;

(h) carrying out pledge executions and auctions;

(i) maintenance of complete files and records of each Loan;

(j) maintenance of complete, updated, and precise accounting records.

Administration File (attached to the Customer File, Communication "A" 2216)

The administrator must maintain an Administration File in which the following is stored:

(a) All communications sent to Applicants or received from them.

(b) All documentation related to the loan that originates after its disbursement, such as contractual modifications.

(c) Documentation related to delinquency, execution, and auction.

(d) Cancelatory documentation of the loan.

(f) Any other element, including the call log, that is considered relevant at the discretion of the entity.

Collection of Installments

The administrator must perform the following activities:

(a) With reasonable advance notice of the installment due date, inform debtors of the amount thereof, due date, applicable interest rate (for variable loans), additional amounts to the pure principal and interest installment to be paid, principal balance, and all other data tending to supply the debtor with all necessary information (place and hours of payment, for example).

(b) Receive and impute payments made by debtors.

Other Administrator Tasks

Furthermore, the administrator must, at a minimum:

(a) Monitor life and damage insurance (and disability and unemployment if any) to ensure that at all times debtors and the vehicle are covered against insured risks.

(b) In the event of an accident, file relevant claims with the respective insurance companies.

(c) Collect life indemnities and apply them to the total or partial cancellation of the loan, as applicable.

(d) For vehicle accidents, determine whether received indemnities should be applied to repair thereof or to the cancellation of the loan.

(e) Make modifications to the loan terms and conditions that are agreed upon with the debtor and are acceptable according to the guidelines of this Manual.

(f) Control and supervise the process of vehicle seizure.

(g) Permanently update data regarding the debtor, such as address, personal and work phone.

(h) Monitor and regularize delinquency according to what is established in this Manual.

Administration and Monitoring of Payment Delays

In order to perform adequate monitoring and regularization of delays, the administrator must take into account the following general guidelines:

(a) The administrator must use their best efforts to collect periodic payments upon their maturity, according to the loan conditions.

(b) In the event of payment delay, the administrator must maintain immediate, direct, and frequent contact with the Debtor, Co-debtor, and Guarantor, as applicable, in order to remedy such breach as soon as possible.

(c) Whenever feasible or recommended, communication with the Debtor must include personal interviews with them.

(d) All administration tasks regarding the monitoring of delays must be fully documented and safeguarded in the Administration File.

Schedule for Administration of Accounts with Delays

The schedule detailed below contains guidelines tending to this end, which the administrator may and must adapt to the particular circumstances of each concrete case, including modifications in terms and conditions, agreements for regularization of delays, forgiveness of penalty interest, and other usual practices.

(a) As soon as the delay occurs (for example, within two to five days thereafter), the administrator must contact the Debtor and/or Co-debtor and/or Guarantor by telephone and inform them that, according to the administrator's records, the payment has not been made. The administrator must keep a record of telephone calls (date and time of the call, response of the Debtor/co-debtor, any promise of payment made, etc.) which will be included within the Administration File.

(b) Within thirty days after the delinquency, the administrator must continue contacts with the Debtor and, if deemed convenient, send one or more letters informing them (i) that the administrator's records indicate a lack of payment and (ii) the amounts owed. If no response is obtained, a formal communication must be sent. Furthermore, the Debtor may be requested to appear at the administrator's offices to explain the reasons for the delinquency.

(c) At the latest within thirty days after the delinquency, the administrator must contact the Debtor to claim payment and warn them that if payment is not made immediately or within an agreed period, actions tending to the execution of the pledge guarantee will begin.

(e) At the latest within ninety days after the delinquency, the administrator may initiate execution actions, if no negotiations with the debtor intervene.

Execution Procedure

In the event that activities tending to the regularization of delinquency do not produce results, or if due to particular circumstances of the case it is determined that regularization efforts will be fruitless, the administrator will initiate pledge execution procedures.

In this matter, the provisions of the legal regime of pledge with registration (Decree-Law 15.348/46 and complements) apply.

Among the activities recommended to the administrator are:

(a) Once having possession of the vehicle, take precautions for its storage and conservation, including payment of taxes and maintenance of insurance (except coverage for civil liability when the vehicle is not driven).

(b) Keep records of the various procedures performed and safeguard them together with the respective documentation in the Administration File.

Proceeds of Execution

The proceeds of the execution will be destined to the payment of amounts owed in connection with the loan, expenses and fees incurred during the same, and, if there is a remainder, it must be returned to the debtor.

Section IV. Information Systems

Generalities

Given the volumes of information, it is strictly necessary that it be managed informatized. Each entity may use the systems they deem most convenient, as long as they allow data to be transferred easily to a magnetic medium in "text", "ASCII" format, or high-compatibility database.

For each loan, there are two types of information:

(a) Reference information, which describes the general characteristics of the loan and the data of the Applicants and the vehicle, and

(b) Installment information, which shows the development of the loan installments and payments made by the debtor.

Each financial entity may develop its database in the manner they deem most convenient as long as the requirements established in this Manual are met. The fields detailed in this section as "Installment Information", plus the fields appearing in the attached forms as Annexes I and II are those that must necessarily contain said databases, with each financial entity able to add those they deem convenient.

The financial entity must develop supporting documentation for the databases, including the definitions of each field and the codes used.

Installment Information

The installment database must contain the development of all installments corresponding to the loan in question, with each installment being a record of said database. For each record, the following fields must be included:

Loan Identification Number

Installment Number The number of the corresponding installment.

Due Date Established due date of the installment.

Installment Amount Indicate principal, interest, expenses, premiums, taxes, and other charges, disaggregated and totaled.

Current Interest Rate Indicate the nominal annual rate applied for the calculation of the installment.

Amount Paid Indicate the amount paid by the debtor.

Payment Date Indicate the date of effective payment made by the debtor.

Principal Balance Indicate the principal balance after the installment has been paid.

Remaining Term in Months This field must reflect the current updated remaining term, expressed in months.

Modification of Terms Indicate if the original terms were modified after granting.

Next Installment Amount Indicate principal, interest, expenses, premiums, taxes, and other charges, disaggregated and totaled, of the next installment due.

Current Status of the Loan Indicate if it is in normal situation, with delays of up to 30 days, delays from 31 to 60 days, delays exceeding 60 days, in execution, and canceled.

History of Defaults Indicate the number of times delays of up to 30 days, from 31 to 60 days, and exceeding 60 days have occurred.

Prepaid Amount Indicate the principal amounts prepaid by the debtor between the day after the previous installment and this one.

B.C.R.A. STANDARDIZATION OF PLEDGE LOANS
ON HOUSING
ANNEX I
TO COMM.
"A" 2563
( TEXT ACCORDING TO COMM. "A" 2677)
ORIGINATION AND ADMINISTRATION MANUAL
OF PLEDGE LOANS ON REAL ESTATE

Introduction and Objectives

This Manual establishes a set of guidelines, practices, and procedures that financial entities must follow in the origination and administration of loans with mortgage guarantee on properties for housing.

Loans granted to natural persons that are secured by a first-degree mortgage on properties intended for housing, permanent or not, located within the national territory are included. For the purposes of this document, loans that meet the detailed characteristics will be referred to as "Real Estate Loans".

This Manual is organized into four sections:

I. Characteristics and Guidelines for the Granting of Real Estate Loans

II. Origination of Real Estate Loans

III. Administration Procedures

IV. Information Systems

Section I develops the general concepts related to the granting of Real Estate Loans, such as Applicant characteristics, destination of funds, and loan modalities. In Section II, the various steps and procedures for origination are detailed, from the Loan Application to the granting thereof. Section III addresses aspects related to the administration of Loans, that is, once they have been originated and instrumented. Finally, Section IV specifies the information and statistics requirements that entities must maintain regarding the portfolio.

The Origination and Administration Manuals and the Appraisal Manual must be available to Applicants at the entities.

Section I. Characteristics and Guidelines for the Granting of Real Estate Loans
Borrower, Co-borrower, and Guarantor Requirements The following list of requirements applies to the Borrower, Co-borrower(s), and Guarantor(s) of a Real Estate Loan, collectively referred to as "Applicants." The borrower is understood as the credit holder. In the case of more than one borrower, all together will be referred to as co-borrowers. Co-borrowers must assume their obligation jointly, and also act as mortgagors if the property to be mortgaged is their own. Mortgagors can also be other co-owners of the property who do not assume the status of borrowers because they are not credit holders. Mortgagors can become simple, plain, and principal payers, thereby becoming guarantors. Persons who are not owners of the property used as collateral can also assume the status of guarantors. In the case of a simple mortgagor, it is recommended that they assume the status of guarantor. The requirements that Applicants must meet are:
(a) Be natural persons, of legal age or civilly emancipated and authorized to conduct commerce.
(b) Be fully authorized to conduct financial transactions, meaning they are not disqualified for any reason by a competent authority.
(c) There must be no pending lawsuits or judicial cases, which in the entity

1. Registration in the Property Registry,
2. Notaries Association,
3. Statistics fees of the Notaries Association,
4. Registration pages,
5. Matrix stamp pages,
6. Testimony,
7. Notary fees,
8. Municipal taxes;

• liquidation expenses:

1. Commission,
2. Request,
3. Credit report,
4. Cadastral update,
5. Real estate commission,
6. Appraisal,
7. Surveying;

• any other processing expense of the loan;
• surcharge for early cancellation;
• pre-cancellation mechanism admitted, conditions and expenses;
• delay in disbursement from the formalization of the loan.
  In all items that imply expenses, it will be clearly stated who will bear them (the entity or the Applicants) and at what moment these expenses must be integrated.
  In cases where the amount of an item is not known with certainty, an estimate based on the information possessed by the lender at that time will be stated, which will be duly clarified. From the moment the Applicant receives the "Information of Granting" and the "Loan Form", they will be informed of a certain timeframe within which they have to complete the procedures linked to the formalization of the loan. In the case of modification of the mortgage credit contract or refinancing, a similar "Loan Form" must be delivered before the formalization of the new conditions. A model of the mortgage credit contract must be delivered to the Applicant together with the "Loan Form". No expense related to the mortgage loan may be charged to the debtor that is not provided for in the mortgage credit contract.

Instrumentation and Disbursement
After the credit analysis, approval by the financial entity of the granting of the loan, and acceptance of the conditions by the Applicants, the Instrumentation and disbursement of the Real Estate Loan will proceed using the model contract established in Annex III, the content of which must be interpreted as indispensable and unmodifiable text.

Legal File (attached to the Client File, Communication "A" 2216) After disbursement, a legal file (which may also be a section of the credit file) must be created containing, at a minimum, the following documentation:
(a) Deed of the credit contract with mortgage guarantee, duly registered in the respective records, in testimony for the mortgage creditor.
(b) Testimony of the respective title of ownership (if not included in the previous instrument).
(c) Life and damage insurance policies (invalidity and unemployment if applicable), duly endorsed in favor of the mortgage creditor, or proof of coverage within a global policy, or the place where such documentation is safeguarded. The annexes to the Client File may be physically separated provided that the provisions of Communication "A" 2216 are met.

Audits and Quality Control
It shall be the obligation of each financial entity to implement a quality control system neutral and independent of the origination procedures, which may be carried out jointly with Internal Audit by personnel who do not participate in the origination, approval, or administration functions of Real Estate Loans. The objective of quality control is to ensure that the established procedures have been applied correctly and that the originated loans meet the relevant requirements and approvals. The quality control system must provide for a) the detection of discrepancies between actual and established procedures, and b) the taking of corrective measures quickly. Quality control must include the review of a statistically reliable sample of loans, the size of which must be a function of the total volume of Real Estate Loans and risk levels. Within the sample, the following must be carried out:
(a) the review of credit and legal files, verification of the existence and accuracy of documentation regarding the property and credit and legal aspects; (b) the evaluation of the quality of property appraisals; (c) the evaluation of credit decisions; (d) inspections of properties to verify compliance with the destination of the loans; (e) request for title certificates to verify the correct registration of mortgage guarantees.

Quality control must be constant and permanent, with a review level that ensures statistical reliability of the sample performed.

Section III. Administration Procedures
Generalities
Once the Real Estate Loan is disbursed, the originating financial entity becomes its administrator. The main functions of the administrator can be summarized as follows:
(a) the collection of periodic installments of principal, interest, and other accessories (commissions, expenses, insurance premiums, taxes); (b) the control of the use of funds when the destination of the loan is construction or completion; to this end, the financial entity must implement a system of work progress control through periodic visits or inspections or by using work certificates; (c) maintenance of adequate records of collections; (d) maintenance and monitoring of insurance policies (life insurance and damage insurance); (e) processing of indemnity claims for accidents; (f) processing of pre-cancellations; (g) monitoring and regularization of delinquency; (h) carrying out mortgage executions and auctions; (i) maintenance of complete archives and records of each loan; (j) maintenance of complete, updated, and precise accounting records.

Administration File (attached to the Client File, Communication "A" 2216) The administrator must keep an Administration File in which the following is stored:
(a) All communications sent to the Applicants or received from them.
(b) All documentation related to the loan that originates after its disbursement, such as contractual modifications.
(c) Updated Appraisal Reports, if any.
(d) Work certificates, if applicable.
(e) Documentation related to delinquency, execution, and auction.
(f) Loan cancellation documentation.

(g) Any other element, including the call log, that is considered relevant at the discretion of the entity.

Collection of Installments
The administrator must perform the following activities:
(a) With reasonable advance notice of the installment due date, inform the debtors of the amount, due date, applicable interest rate (for variable loans), additional amounts to the pure principal and interest installment to be paid, and any other data intended to supply the debtor with all necessary information. (b) Receive and impute payments made by the debtors.

Other Administrator Tasks
Furthermore, the administrator must at a minimum:
(a) Monitor life and damage insurance (and disability and unemployment if applicable) to ensure that at all times the debtors and the property are covered against insured risks. (b) In the event of an accident, file the relevant claims with the respective insurance companies. (c) Collect life indemnities and apply them to the total or partial cancellation of the loan, as appropriate. (d) In the case of property accidents, determine whether the received indemnities should be applied to the repair or restoration of the property or to the cancellation of the loan. (e) When the case arises, determine compliance with the conditions to effect voluntary pre-cancellations by the debtor and apply the received funds according to the agreed modality. (f) Make modifications to the terms and conditions of the loan that are agreed upon with the debtor and are acceptable according to the guidelines of this Manual. (g) Control and supervise the expropriation process of the property, if any, controlling and approving the negotiations the debtor carries out with the intervening public entities. (h) Permanently update data related to the debtor, such as address, personal and work phone.

(i) Monitor and regularize delinquency according to what is established in this Manual.

Administration and monitoring of payment delays In order to carry out adequate monitoring and regularization of delays, the administrator must take into account the following general guidelines:
(a) The administrator must use their best efforts to collect monthly payments upon their maturity, in accordance with the loan conditions.
(b) In the event of payment delays, the administrator must maintain immediate, direct, and frequent contact with the Debtor, Co-debtor, and Guarantor, as applicable, in order to remedy such default as soon as possible. (c) Whenever feasible or advisable, communication with the Debtor must include personal interviews with them. (d) All administration tasks regarding the monitoring of delays must be fully documented and safeguarded in the Administration File or on magnetic media.

Schedule for Administration of Accounts with Delays
Immediate reaction once a payment delay occurs is one of the keys to achieving regularization. The schedule detailed below contains guidelines aimed at this end, which the administrator may and must adapt to the particular circumstances of each concrete case, including modifications in terms and conditions, agreements for regularization of delays, forgiveness of punitive interest, and other usual practices. (a) As soon as the delay occurs (for example, within two to five days thereafter), the administrator must contact the Debtor and/or Co-debtor and/or Guarantor by telephone and inform them that, according to the administrator's records, the payment has not been made. The administrator must keep a record of telephone calls (date and time of the call, response of the Debtor/co-debtor, any payment promise made, etc.) which will be included in the Administration File. (b) Within thirty days after the default, the administrator must continue contacts with the Debtor and, if deemed appropriate, send one or more letters informing them (i) that the administrator's records indicate a lack of payment and (ii) the amounts owed. If no response is obtained, a formal communication must be sent. Likewise, the Debtor may be requested to appear at the administrator's offices to explain the reasons for the delinquency. (c) From thirty days after the default, the administrator must contact the Debtor to demand payment and warn them that if payment is not made immediately or within an agreed timeframe, actions aimed at the execution of the mortgage guarantee will be initiated.

(d) At the latest within sixty days after the default, it is suggested that the administrator perform a first inspection of the property.
(e) From ninety days after the default, the administrator may initiate execution actions, if no negotiations with the debtor have taken place.

Execution Procedure
In the event that activities aimed at regularizing delinquency do not produce results, or if due to particular circumstances of the case it is determined that regularization efforts will be fruitless, the administrator will initiate mortgage execution procedures. As a general criterion, the procedure provided for in Law 24.441, Title V, must be applied, unless due to the characteristics of the case it is determined that it is not advisable to use said procedure and judicial execution is opted for. The administrator must use professionals specialized in this type of procedures, especially lawyers and public notaries. Among the activities recommended to the administrator are:
(a) Frequent inspections of the property to establish its condition.
(b) Carrying out one or more Appraisal Reports.
(c) Once possession of the property is obtained, take precautions for its safekeeping and conservation, including maintenance of insurance and payment of taxes.
(d) Keep records of the different procedures carried out and safeguard them together with the respective documentation in the Administration File.

Proceeds of Execution
The proceeds of the execution will be destined to the payment of the amounts owed under the loan, the expenses and fees incurred during the same, and, if there is a surplus, it must be reimbursed to the debtor.

Section IV. Information Systems
Generalities
Given the volumes of information, it is strictly necessary that it be managed informatized. Each entity may use the systems it deems most appropriate, provided that they allow data to be easily transferred to a magnetic medium in "text", "ASCII" format, or a highly compatible database. For each loan, there are two types of information:
(a) Referential information, which describes the general characteristics of the loan; and (b) Installment information, which shows the development of the loan installments and payments made by the debtor. Each financial entity may develop its database in the manner it deems most appropriate provided that the requirements established in this Manual are met. The fields detailed in this section as Installment Information, plus the fields appearing in the attached forms as Annexes I and II to Section II are the minimum that these databases must contain, each financial entity being able to add those it deems appropriate. The financial entity must develop supporting documentation for the databases, including the definitions of each field and the codes used.

Installment Information
The installment database must contain the development of all installments corresponding to the loan in question, with each installment being a record of said database. For each record, the following fields must be included:
Loan Identification Number
Installment Number Is the number of the corresponding installment.
Due Date Established due date of the installment.
Installment Amount Indicate principal, interest, expenses, premiums, taxes, and other charges, disaggregated and totaled.
Current Interest Rate Indicate the nominal annual rate applied for the calculation of the installment.
Amount Paid Indicate the amount paid by the debtor.
Payment Date Indicate the date of effective payment made by the debtor.

Principal Balance Indicate the principal balance once the installment has been paid.
Remaining Term in Months This field must reflect the current remaining term, expressed in months.
Modification of Terms Indicate if the original terms were modified after granting.
Amount of Next Installment Indicate principal, interest, expenses, premiums, taxes, and other charges, disaggregated and totaled, of the next installment to mature.
Current Status of the Loan Indicate if it is in normal situation, with delays of up to 30 days, delays from 31 to 60 days, delays over 60 days, in execution, and cancelled.
History of Defaults Indicate the number of times delays of up to 30 days, from 31 to 60 days, and over 60 days have occurred.
Pre-cancelled Amount Indicate the principal amounts pre-cancelled by the debtor with this installment.