Circular OPRAC 1 - 418. Standardization of Mortgage and Pledge Loans. Adjustment of Provisions

CENTRAL BANK OF THE ARGENTINE REPUBLIC
COMMUNICATION "A" 2645 29/12/97
TO FINANCIAL ENTITIES:
Ref.: Circular OPRAC 1 - 418. Standardization of mortgage and pledge loans. Adjustment of its provisions.
We address you to inform you that this Institution adopted the following resolution:

"1. Suspend, until 6/30/98, the requirement for qualification regarding local insurance companies that must cover life and property risks linked to real estate and pledge loans established in the Manuals of Origin and Administration made known through Communications "A" 2563 and 2586, respectively.

2. Replace in the Manual of Origin and Administration of auto pledge loans (Annex to Communication "A" 2586), the aspects indicated in each case:

2.1. Section I.:
a) Computable Income of Applicants. Self-Employed Workers (page 4):
"Income arising from Tax Declarations submitted to the DGI Income from rents (monthly average of the last two years) Applicants must present supporting documentation of declared income in accordance with current regulations." b) Payment/Income Ratio. (4th paragraph) - (page 4):
"In the case of self-employed workers, special attention must be paid to computing the Applicant's income and not the income of the activity carried out by the Applicant. For example, if the Applicant is a partner in a company that operates a business, the tax declarations of the Applicant should be considered, not those corresponding to the company."

c) Amount/Asset Value Ratio. (1st paragraph) - (page 5):
"It is the percentage relationship that exists between the agreed loan amount and the value of the motor vehicle as derived from the sale price agreed with the seller or from terminal/importer price lists and/or specialized publications, whichever is lower." d) Motor Vehicle Damage Insurance. Subsections (a) and (b). (page 7):
"(a) That it covers the motor vehicle during the entire life of the Auto Pledge Loan against 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 Auto Pledge Loan and that in the event of a claim it be cancelatory thereof if the destruction is total."

2.2. Section II.:
a) Loan Application. Employment Information of Applicants:
"Self-Employed. (page 9):
copy of the enabling title, professional registration or municipal license or registration in the Gross Income Tax, last annual declaration of the Income Tax and/or the Value Added Tax and/or the Gross Income Tax". b) Credit File (attached to the Client Record established by Communication "A" 2216). (3rd paragraph) - (page 11):
"A model of a pledge credit contract must be delivered to the Applicant upon informing about the granting of the credit."

c) ANNEX I. Auto pledge credit application. ANNEX II. Approval and analysis form:
According to models attached as Annexes "A" and "B" to this communication.

3. Delete in Section III. of the Manual of Origin and Administration of auto pledge loans (Annex to Communication "A" 2586, page 14), subsection (i) of section "Other Tasks of the Administrator" and, in the credit contract with auto pledge guarantee (Minimum Guidelines, Annex to Communication "A" 2591), clause twenty.

4. Replace clause ninth of the credit contract with auto pledge guarantee (Minimum Guidelines, Annex to Communication "A" 2591), with the following:

"Ninth. Insurance of the asset. For protection of the credit, the LENDER will contract on behalf and at the expense of the BORROWER in favor of the LENDER, with a first-line insurance company chosen by the LENDER, an insurance on the asset pledged with a minimum coverage of Theft, Robbery, Fire, Civil Liability, and Total Destruction, for an amount that at all times is equivalent to the value of said asset. The BORROWER hereby authorizes the LENDER to debit the expenses incurred by the insurance management as well as the amount of premiums and relevant updates from any of the accounts of the BORROWER, to which effect the provisions of clause Fourteenth shall apply. It is expressly established that, in the absence of payment of the corresponding premiums or the readjustment of the insured sums or of the sums disputed for any other concept related to the insurance or the non-compliance of the remaining obligations of the BORROWER in matters of this coverage, the LENDER may at its exclusive option: a) declare the agreed terms expired, without the need for prior notice of any nature, and demand immediate payment of this Credit, being also empowered to execute this Guarantee; b) pay said premiums on behalf and order of the BORROWER and c) contract a new insurance in accordance with the previously expressed guidelines, upon expiration of the original insurance contract. If the BORROWER does not pay said sums within ten days of being requested, the LENDER may, without prejudice to the payment made or the new policy contracted, proceed according to the terms of subsection a) of this point, in which case the total debt will be increased with the expenses the LENDER had to bear in concept of insurance and whose payment is also guaranteed with this pledge. Unless otherwise agreed, in the event of a claim, the indemnification for theft, robbery, fire, and total destruction will be applied first to the payment of the total outstanding balance of the credit, whether due or not, and the remainder, if any, will be delivered to the BORROWER."

5. Replace in the Manual of Origin and Administration of real estate loans (Annex I to Communication "A" 2563), the aspects indicated in each case:

5.1. Section I.:
a) Computable Income of Applicants. Self-Employed Workers (page 4):
"Income arising from Tax Declarations submitted to the DGI (monthly average of the last two years) Income from rents (monthly average of the last two years) Applicants must present supporting documentation of declared income in accordance with current regulations." b) Payment/Income Ratio. (4th paragraph) - (page 5):
"In the case of self-employed workers, special attention must be paid to computing the Applicant's income and not the income of the activity carried out by the Applicant. For example, if the Applicant is a partner in a company that operates a business, the tax declarations of the Applicant should be considered, not those corresponding to the company."

5.2. Section II.:
a) Loan Application. Employment Information of Applicants:
"Self-Employed. (page 10):
copy of the enabling title, professional registration or municipal license annual declaration of the Income Tax (last two) certificate of tax status before the D.G.I. (Form D.G.I. No. 576) detail of pension contributions with copy of the last 6 payments made" b) Credit Folder (attached to the Client Record established by Communication "A" 2216):
"Notification of Acceptance" (page 12) is replaced by "Granting Information".
"notification" is replaced by "information".
"the offer" (ninth paragraph, page 13) is replaced by "the loan"

In the fifth paragraph:
"If the application is approved, the entity must send a granting information."

We salute you very attentively.
CENTRAL BANK OF THE ARGENTINE REPUBLIC
Agustín Villar Alfredo A. Besio
Manager of Economic Analysis and Information
Manager of Standards for Financial Entities

ANNEXES

ANNEX I Annex "A"
to Com. "A" 2645

SUPPLEMENTARY SHEET / AUTO PLEDGE CREDIT APPLICATION

ANNEX II Annex "B"
to Com. "A" 2645