Circular No. 1278 — Housing Finance System (SFH) — Housing Financing Rules and FAHBRE Fund

CIRCULAR NO. 001278

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

We communicate that the Board of Directors of the Central Bank, in view of the provisions of item XXIII of Resolution No. 1,446, of 05.01.88, has decided to establish the following points regarding housing financing granted by financial agents within the scope of the Housing Finance System (SFH):

a) Financing may only be granted to applicants who do not hold, anywhere in the country, another financing under the conditions established for the Housing Finance System (SFH);

b) Financing may not be granted to applicants who are owners or promissory buyers of residential property in the location of their domicile, understood as the place where the person establishes or intends to establish residence with the intention of permanence;

c) The provisions of items "a" and "b" of this item shall not apply if the contract regarding the new acquisition includes, as a penal clause, the provision that failure to alienate the previous residential property within the maximum non-extendable period of 180 (one hundred and eighty) days will constitute a breach of contract, with the consequent early maturity of the debt, and also the non-coverage of the Wage Variation Compensation Fund (FCVS) - if applicable - and of the insurances related to the second acquisition, with the financial agent required to demand faithful compliance with such contractual clause;

d) The unit value of the financing, comprising principal, rates, and insurances, under the conditions of item II, items "b" and "c", of Resolution No. 1,446, of 05.01.88, 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, whichever is lower;

e) In credit operations that bind entrepreneurs and builders as borrowers, financing of up to 100% (one hundred percent) of the direct construction cost will be admitted, provided that the limit of 5,000 (five thousand) OTN per housing unit is observed;

f) Individual financing for the construction of housing on its own urbanized lot of up to 100% (one hundred percent) of the direct construction cost will be admitted, subject to 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;

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

h) The percentage of contribution to the Wage Variation Compensation Fund (FCVS) will be due:

I - monthly by borrowers with contracts governed by the Wage Equivalence Plan by Professional Category and with coverage of 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 the financing granted to borrowers within the scope of the Housing Finance System (SFH);

i) The Wage Equivalence Coefficient (CES) used for the purpose of calculating the monthly financing installment will be 1.15 (one whole and fifteen hundredths), which will also apply to the monthly premium of the insurances provided for in the Housing Insurance Policy;

j) The contracting of new financing, under the conditions established for the Housing Finance System (SFH), may only be carried out through contracts that provide for full wage equivalence, except for the option provided for in item "c" of item VIII of Resolution No. 1,446, of 05.01.88, and with an amortization system using the "price table";

l) 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 both events occur on the same date;

m) The insurances related to the property and the borrower will have their inclusion in the Housing Insurance Policy of the Housing Finance System (SFH) only in the operations referred to in items "b" and "c" of item II of Resolution No. 1,446, of 05.01.88;

n) The transfer of financing contracts of the Housing Finance System (SFH) will be carried out through the granting of a new financing to the acquirer, under the conditions established for the said System, maintaining the classification of origin (new or used), if:

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

II - there is an additional disbursement of resources and the financing remains within the limit of 5,000 (five thousand) OTN;

o) Housing properties financed by the Housing Finance System (SFH), when received in payment in kind, adjudicated, or auctioned by the financial agent, may be subject to full financing to the new borrower, observing the other conditions of the said System, receiving treatment identical to the cases of transfers referred to in the previous item;

p) The financing already granted under the auspices of the Housing Finance System (SFH) and not governed by the provisions contained in the normative acts issued by the National Monetary Council and by this Central Bank, continue to be computed in the operations of the said System, for the purpose of calculating the limit of direction referred to in items "b" and "c" of item II of Resolution No. 1,446, of 05.01.88.

2. The resources referred to in item "a" of item II of Resolution No. 1,446, of 05.01.88, will be applied in housing financing for:

a) Acquisition or construction of properties not covered by financing of the Housing Finance System (SFH);

b) Reform or expansion of housing properties;

c) Acquisition, construction, or reform of housing properties with guarantee of another property of the borrower themselves;

d) Acquisition, linked to housing developments, of equipment intended for urban infrastructure.

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

a) With mortgage guarantee;

b) Without coverage of the Wage Variation Compensation Fund (FCVS);

c) With financial charges agreed upon by the contracting parties;

d) With contribution to the Housing Assistance Fund (FUNDHAB).

4. The following operational modalities may compose the free-range operations, referred to in item "c" of item I, of Resolution No. 1,446, of 05.01.88:

a) Housing financing not covered by the Housing Finance System;

b) Working capital financing to companies producing and distributing construction materials, through credit opening contracts;

c) Working capital financing to incorporating companies, through credit opening contracts guaranteed by pledge of promissory notes issued by third parties in favor of the financed company, linked to a completed, individualized property, delivered to the acquirers and with liquidated mortgage debt;

d) Acquisition of federal, state, and municipal public debt securities, and of Letters of the Central Bank of Brazil;

e) Acquisition of credit rights of other financial institutions, except credits related to operations with individuals;

f) Financial leasing of real estate assets, celebrated with the seller of the asset itself, in accordance with current regulation;

g) Acquisition of credit rights of financial leasing contracts;

h) Interbank deposits, in accordance with current norms;

i) Mortgage loans, understood as the opening of credit guaranteed by mortgage of real estate;

j) Acquisition of mortgage letters issued by other financial agents;

l) Voluntary deposits at the Central Bank of Brazil, in accordance with current regulation.

5. The resources not applied in accordance with the provisions of item "b" of item I and items "b" and "c" of item II of Resolution No. 1,446, of 05.01.88, will be remitted to the Central Bank, in current currency, on the 15th (fifteenth) day of the following month to the date the position was ascertained, or on the next business day if the 15th (fifteenth) is a non-business day, established that:

a) The said resources will be remunerated monthly by the same indices of update of free savings deposits, plus interest of 6% a.a. (six percent per year);

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

c) Until the business day prior to the date fixed for the remittance, real estate credit companies, savings and loan associations, and economic banks will inform the Central Bank of Brazil - Banking Operations Department (DEBAN), or to the Regional Department to which they are subject - in a statement instituted 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 of the previous item, the remuneration provided for in this item will be entered in a linked account, until the delivery of the statement, without right to any additional yield;

e) If the statement is not delivered until the business day prior to the date of remittance, this will be carried out on the second business day following the date of delivery of the statement, with the institution subject to the pecuniary penalty provided for in item 8 of Circular No. 1,098, of 16.12.86, for the number of days of the deficiency presented.

6. Temporarily and exceptionally, voluntary deposits at the Central Bank will be considered as housing applications, for the purpose of compliance with the provisions of items "a" and "c" of item II of Resolution No. 1,446, of 05.01.88, with the lower of the following values being computed:

a) The monthly average balance of voluntary deposits ascertained on each base date; or

b) That resulting from the application of the following percentages on the position existing on 31.12.87, corrected monthly by the indices of update of free savings deposits:

---

DATA-BASE PERCENTUAL
------ until 31.12.87 100% until 29.01.88 95% until 29.02.88 90% until 31.03.88 85% until 29.04.88 80% until 31.05.88 75% until 30.06.88 70% until 29.07.88 65% until 31.08.88 60% until 30.09.88 55% until 31.10.88 50% until 30.11.88 45% until 31.12.88 40% until 31.01.89 35% until 28.02.89 30% until 31.03.89 25% until 30.04.89 20% until 31.05.89 15% until 30.06.89 10% until 30.07.89 5% until 30.08.89 0% ------

7. As a result of the provisions of item XXII of Resolution No. 1,446, of 05.01.88, financial agents of the Housing Finance System (SFH) may conclude negotiations that were being developed until 31.07.87, provided that one of the following hypotheses is verified:

a) Financing proposal formalized with the financial agent;

b) Promise of purchase and sale of housing units celebrated by entrepreneur builders, linked to a loan realized by an institution of the Housing Finance System (SFH), in which the buyers are assured the obtaining of financing for parts of the respective acquisition cost;

c) Financing contracts for production duly signed.

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

9. Item 3 of Circular No. 1,150, of 24.03.87, shall have the following wording:

"3. In the calculation of operational limits within the scope of the Housing Finance System (SFH), the following procedure will be adopted:

a) The balance of the applications of agents in mortgage letters with a term equal to or greater than 5 (five) years may be computed as financing within the Housing Finance System (SFH), up to the level of 30% (thirty percent) of the value required in item "c" of item II of Resolution No. 1,446, of 05.01.88;

b) The balance of the issuance of mortgage letters will be subtracted from housing financing."

10. Circulars No. 1,214, of 04.08.87, 1,241, of 22.10.87, 1,260, of 27.11.87, 1,262, of 04.12.87, 1,265, of 18.12.87, and the Letter-Circular No. 1,716, of 09.09.87, are hereby revoked.

Brasília-DF, January 5, 1988

Luiz Aranha Corrêa do Lago Wadico Waldir Bucchi Director Director