Circular No. 1214: Unapplied Resources of Real Estate Credit Societies, Savings and Loan Associations, and Economic Savings Banks in Housing Financing Must Be Remitted to the Central Bank

CIRCULAR NO. 001214

To
Real Estate Credit Societies, Savings and Loan Associations, and Economic Savings Banks

We inform you that the Board of Directors of the Central Bank, considering the provisions of item XXII of Resolution No. 1,361, of 07/30/87, has decided that resources not applied in accordance with the provisions of item I, item "b," and items II, items "b" and "c," of the same normative instrument, shall be remitted to the Central Bank in current currency, by the 15th (fifteenth) day of the subsequent month, or on the immediately following business day if the 15th (fifteenth) is not a business day, establishing:

a) said resources shall be updated monthly, based on the correction indices of free savings deposits, plus interest of 6% a.a. (six percent per year);

b) financial agents must enter into an agreement with a commercial bank that expressly authorizes the Central Bank to make all entries related to the remittance in its "Bank Reserves" account;

c) by the business day prior to the date fixed for the remittance, real estate credit societies, savings and loan associations, and economic savings banks shall inform the Central Bank of Brazil - Department of Banking Operations (DEBAN), or the Regional Department to which they are subject - in a demonstration established by DEBAN, the amount to be remitted and the commercial bank in whose "Bank Reserves" account the debit will be made;

d) in the event of non-compliance with the provision in the previous item, the remuneration provided for in this item shall be posted to a linked account, until the delivery of the demonstration, without any additional yield;

e) the release of the remitted resources will be effected 1 (one) month after the date of forwarding the control map regarding the position in which the classification occurs.

2. Voluntary deposits made at the Central Bank, in accordance with item IV of Resolution No. 1,253, of 01/28/87, are characterized as free-range operations for the purposes of the provision in item I, item "c," of the aforementioned Resolution No. 1,361, of 07/30/87.

3. Temporarily and exceptionally, the following percentages of voluntary deposits referred to in the previous item shall be considered as housing applications, for the purposes of compliance with the provisions of items II, items "a" and "c," of Resolution No. 1,361, of 07/30/87:

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DATA BASE PERCENTUAL
------ until 08/31/87 100% until 09/30/87 95% until 10/30/87 90% until 11/30/87 85% until 12/31/87 80% until 01/29/88 75% until 02/29/88 70% until 03/31/88 65% until 04/29/88 60% until 05/31/88 55% until 06/30/88 50% until 07/29/88 40% until 08/31/88 30% until 09/30/88 20% until 10/31/88 10% ------

4. The following operational modalities may compose the free-range operations, referred to in item I, item "c," of Resolution No. 1,361, of 07/30/87:

a) working capital financing for companies producing and distributing construction materials of interest to the Housing Financial System (SFH), through credit opening contracts;

b) working capital financing for developers, through credit opening contracts guaranteed by the pledge of promissory notes issued by third parties in favor of the financed entity, observing the provisions of item V, item "c," of Resolution No. 386, of 07/21/76;

c) acquisition of federal, state, and municipal public debt securities, and of Letters of the Central Bank of Brazil (LBC);

d) acquisition of credit rights from other financial institutions, except credits related to operations with individuals;

e) real estate financial leasing, concluded with the seller of the property, in accordance with Article 15 of the Regulation annexed to Resolution No. 980, of 12/13/84;

f) acquisition of credit rights from financial leasing contracts;

g) interbank deposits referred to in Resolution No. 1,111, of 03/19/86;

h) mortgage loans, understood as the raising of funds secured by a mortgage on real estate;

i) acquisition of mortgage letters issued by other financial agents.

5. The resources referred to in item II, item "a," of Resolution No. 1,361, of 07/30/87, shall be applied in housing financing for:

a) acquisition or construction of properties with a sales value greater than 10,000 (ten thousand) OTN;

b) acquisition or construction of properties in locations other than the domicile or residence of the final borrower;

c) construction, by developers, of housing units not intended for sale by the Housing Financial System (SFH);

d) renovation or expansion of housing properties;

e) acquisition, construction, or renovation of housing properties with the guarantee of another property of the borrower himself;

f) acquisition, linked to housing developments, of equipment intended for urban infrastructure.

6. The financing referred to in the previous item shall be carried out under the following conditions:

a) with mortgage guarantee;

b) shall not have coverage from the Wage Variation Compensation Fund (FCVS);

c) with financial charges agreed upon between the contracting parties;

d) with contribution to the Housing Assistance Fund (FUNDHAB), when required in accordance with current regulations.

7. The following points are established regarding housing financing granted by financial agents in the Housing Financial System (SFH):

a) the unit value of financing, including principal, rates, and insurance, for housing financing under the conditions of item II, items "b" and "c," of Resolution No. 1,361, of 07/30/87, may not exceed 5,000 (five thousand) National Treasury Obligations (OTN), nor exceed 90% (ninety percent) of the appraisal value or the purchase and sale price of the property, whichever is lower;

b) in credit operations involving developers and builders as borrowers, financing of up to 100% (one hundred percent) of the direct construction cost shall be admitted, provided that the limit of 5,000 (five thousand) OTN per housing unit is observed;

c) individual financing shall be admitted for the construction of housing on its own urbanized lot of up to 100% (one hundred percent) of the direct construction cost, observing the ceiling of 5,000 (five thousand) OTN, provided that the appraisal value of the land plus the construction cost does not exceed 10,000 (ten thousand) OTN;

d) in cases of financing carried out with the participation of Promoting Agents without profit purposes, financing to the final borrower of a value equivalent to up to 100% (one hundred percent) of the housing investment shall be admitted, observing the limits established in specific regulations;

e) the pass-through of financing as permitted by Resolution No. 1,254, of 01/28/87, may be carried out based on financing contracts for production concluded before 11/24/86;

f) housing financing may be granted, within the conditions of the Housing Financial System (SFH), regarding properties constructed outside the domicile or residence of the purchaser, provided that the financing contracts for production were signed before 11/24/86;

g) the percentage of contribution to the Wage Variation Compensation Fund (FCVS) shall be due:

I - monthly by borrowers with contracts governed by the Wage Equivalence Plan by Professional Category and with coverage from the Wage Variation Compensation Fund (FCVS), calculated on the basis of 3% (three percent) of the value of the amortization and interest installment, plus the Wage Equivalence Coefficient (CES);

II - quarterly by financial agents, calculated on the basis of 0.025% (twenty-five thousandths of a percent) of the value of the balance of financing granted to borrowers within the Housing Financial System (SFH);

h) the maximum effective interest rates of 11% (eleven percent) and 12% (twelve percent) for financing to final borrowers, referred to in items III-c and IV-d of Resolution No. 1,361, of 07/30/87, are applicable to any financing value granted, observing the provisions of specific regulations;

i) the Wage Equivalence Coefficient (CES) used for the purpose of calculating the monthly financing installment for contracts governed by the Wage Equivalence Plan by Professional Category shall be 1.18 (one and eighteen hundredths), which shall apply, including, to the monthly premiums of the insurance provided for in the Housing Insurance Policy;

j) the granting of financing is linked to proof that the first monthly charge, including amortization, interest, insurance premiums, and taxes, may not exceed 30% (thirty percent), for financing up to 3,500 (three thousand five hundred) OTN, or 35% (thirty-five percent) for financing exceeding 3,500 (three thousand five hundred) OTN, of the gross family income;

l) the contracting of new financing, under the conditions established for the Housing Financial System (SFH), may only be carried out through contracts that provide for full wage equivalence and amortization system by the "price table," except for the option provided in item IV, item "c," of Resolution No. 1,361, of 07/30/87;

m) in housing financing, the amortization resulting from the payment of installments must be subtracted from the outstanding balance of the financing after its monetary update, even if the two events occur on the same date;

n) the financing term shall be determined based on the financed value, expressed in OTN, observing the table below:

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Financed Value Maximum Term
------ up to 530 OTN 25 years from 531 to 2500 OTN 20 years from 2501 to 3500 OTN 16 years from 3501 to 5000 OTN 15 years ------

8. Insurance regarding the property and the borrower shall be included in the Housing Insurance Policy of the Housing Financial System (SFH) only in operations referred to in item II, items "b" and "c," of Resolution No. 1,361, of 07/30/87.

9. The transfer of financing contracts from the Housing Financial System (SFH) shall be carried out by granting new financing to the purchaser, under the conditions established for the aforementioned System, maintaining the classification of origin (new or used), if:

a) there is no additional disbursement of resources, in which case the value may exceed 5,000 (five thousand) OTN; or

b) additional disbursement of resources occurs and the financing remains within the limit of 5,000 (five thousand) OTN.

10. Housing properties financed by the Housing Financial System (SFH), when received in payment in kind, adjudicated, or auctioned to the financial agent, may be subject to new financing under the conditions of the aforementioned System, receiving treatment identical to the cases of transfers referred to in the previous item.

11. Financing already granted under the auspices of the Housing Financial System (SFH) and not governed by the provisions of the normative instruments issued by the Monetary National Council and by this Central Bank, continue to be counted in the operations of the aforementioned System, for the purpose of calculating the limit of direction referred to in items II, items "b" and "c," of Resolution No. 1,361, of 07/30/87.

12. Housing financing classified under items II, items "b" and "c," of the aforementioned Resolution No. 1,361, of 07/30/87, may only be carried out to applicants who do not hold another housing financing under the conditions established for the Housing Financial System (SFH).

13. Housing financing not classified under the conditions of the Housing Financial System (SFH) may be carried out in the manner of item II, item "a," of Resolution No. 1,361, of 07/30/87.

14. The provisions of item 12 of this Circular shall not apply if, in the contract regarding the new acquisition, there is, in a penal character, the provision that the non-alienation of the previous residential property, within the maximum non-extendable period of 180 (one hundred and eighty) days, will imply non-compliance with the contract, with the consequent early maturity of the debt, and also the non-coverage of the Wage Variation Compensation Fund (FCVS) - if applicable - and insurance related to the second acquisition.

15. The responsibility for the residual balance that may eventually occur in new housing financing contracts, with a value exceeding 2,500 OTN, shall lie with the borrower. This residue, if it occurs, shall be liquidated through new financing, within a period of up to 50% (fifty percent) of the initial term of the contract, always respecting the option for the Wage Equivalence Plan, when this is included in the original contract.

16. The maximum limit for financing carried out within the scope of the Refinancing or Consumer Financing Subprogram of Construction Material (RECON) is established at 5,000 (five thousand) OTN.

17. As a result of the provisions of item XXII of the aforementioned Resolution No. 1,361, of 07/30/87, financial agents of the Housing Financial System (SFH) may conclude negotiations that were being developed before the date of publication of the cited normative instrument, including for the purposes of coverage from the Wage Variation Compensation Fund (FCVS), provided that:

a) a financing proposal formalized with the financial agent; or

b) a promise of purchase and sale of housing units concluded by developer builders, linked to a loan realized by institutions of the Housing Financial System (SFH), in which it is ensured to the buyers the obtaining of financing for portions of the respective acquisition cost.

18. Circulars No. 1,110, 1,111, and 1,112, of 01/21/87, 1,161, of 04/24/87, and 1,178, of 06/04/87, as well as item 3 of Circular No. 1,120, of 01/30/87, and item 4 of Circular No. 1,150, of 03/24/87, are hereby revoked.

Brasília-DF, August 4, 1987

Luiz Aranha Corrêa do Lago Wadico Waldir Bucchi Director Director