Resolution CMN No. 1361 — Lowers Standards on Savings Deposits by Real Estate Credit Companies and Establishes Criteria for Housing Financing

RESOLUTION NO. 001361

THE CENTRAL BANK OF BRAZIL, in accordance with Article 9 of Law No. 4,595, of December 31, 1964, makes public that the MONETARY COUNCIL NATIONAL, in a session held on this date, having regard to the provisions of Article 7 of Decree-Law No. 2,291, of November 21, 1986, and Article 2 of Decree-Law No. 2,349, of July 29, 1987,

RESOLVES:

I - Establish that the resources raised in savings deposits by real estate credit companies, savings and loan associations, and savings banks shall have the following basic direction:

a) 20% (twenty percent) in mandatory reserve at the Central Bank, as provided in current regulation;

b) 60% (sixty percent), at minimum, in housing financing;

c) remaining resources in financial availability and in free-range operations, according to Central Bank regulation.

II - Determine that the application of resources in the manner of item "b" above shall observe the following diversification:

a) 10% (ten percent), at maximum, of the raised resources, in housing financing, at market rates, according to Central Bank regulation;

b) 25% (twenty-five percent), at minimum, of the raised resources, in financing operations of the Housing Financial System (SFH) with a value up to 2,500 (two thousand and five hundred) National Treasury Obligations (OTN), observing the provisions of item V of this Resolution;

c) remaining resources in SFH financing operations with values above 2,500 (two thousand and five hundred) OTN and up to 5,000 (five thousand) OTN, observing the provisions of item VI of this Resolution.

III - Establish the following conditions for the financing referred to in item "b" of item II:

a) mandatory coverage by the Wage Variation Compensation Fund (FCVS);

b) contracting under the Wage Equivalence Plan by Professional Category;

c) maximum effective remuneration, comprising interest, commissions, and other charges, of up to 11% p.a. (eleven percent per year);

d) mandatory inclusion in the Housing Insurance Policy of the Housing Financial System (SFH);

e) maximum limit for the sale price of the financed property of 10,000 (ten thousand) OTN.

IV - Maintain the following conditions for the financing referred to in item "c" of item II:

a) without FCVS coverage, with any outstanding balance at the end of the adjusted term being the responsibility of the borrower, such facts being mandatory in the respective contract clause;

b) renegotiation, between the parties, of any outstanding balance existing at the end of the adjusted term, with the maximum renegotiation term being stated in the original contract;

c) contracting under the Wage Equivalence Plan by Professional Category, with the borrower's express option for another installment adjustment modality;

d) maximum effective remuneration, comprising interest, commissions, and other charges, of up to 12% p.a. (twelve percent per year);

e) mandatory inclusion in the Housing Insurance Policy of the Housing Financial System (SFH), regardless of option for wage equivalence;

f) maximum limit for the sale price of the financed property of 10,000 (ten thousand) OTN.

V - The percentage referred to in item "b" of item II includes deposits in the Housing Production Support Fund for Low-Income Population (FAHBRE) and the Stabilization Fund (FESTA).

VI - The percentage referred to in item "c" of item II includes credits with the Wage Variation Compensation Fund (FCVS) and other credits linked to housing financing.

VII - Contributions to the Wage Variation Compensation Fund (FCVS) and the Housing Assistance Fund (FUNDAHB) and insurance costs are not included in the maximum rates referred to in item "c" of item III, item "d" of item IV, and item XVIII of this Resolution.

VIII - Establish that, in the calculation of monthly charges for housing financing by the Housing Financial System (SFH), the Wage Equalization Coefficient (CES) shall be added to the monthly remuneration referred to in item "c" of item III and item "d" of item IV of this Resolution, if the borrower has opted for the Wage Equivalence Plan by Professional Category.

IX - Establish that the percentages provided in items I and II shall be calculated based on the simple arithmetic mean of savings deposit balances existing at the end of the month, during the last 06 (six) months, duly corrected until the last month, counted from the base date of their application.

X - Determine that housing financing and refinancing in the Housing Financial System (SFH), backed by resources from the Employment Guarantee Fund (FGTS) and other funds destined for housing production for the low-income population, shall be carried out observing the following conditions:

a) financing to final borrowers shall not exceed 2,500 (two thousand and five hundred) OTN per housing unit and shall have interest rates limited as per the table below:

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Financing Value              Interest Rates ------ up to            300 OTN                   2% p.a. from 301 to      600 OTN                   3% p.a. from 601 to      900 OTN                   5% p.a. from 901 to 1,350 OTN                   7% p.a. from 1,351 to 1,800 OTN                   9% p.a. from 1,801 to 2,500 OTN                  10% p.a. ------

b) in the application of resources at the rates stipulated in the previous item, average profitability shall not be lower than the cost of resource remuneration;

c) the granting of financing is linked to proof that the first monthly charge, including amortization, interest, insurance premiums, and fees, shall not exceed the values calculated by applying the parameters below, determined based on the gross family income, expressed in minimum wages, of the applicants:

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Income Class                         Value of 1st Family                             Monthly Installment ------ 1 SM                               10% 1 to 3 SM                               12% 3 to 4 SM                               17% 4 to 6 SM                               20% 6 to 10 SM                               25% above 10 SM                               30% ------

XI - Establish that the granting of financing for the sale of properties to final borrowers, under the conditions established for the Housing Financial System (SFH), may involve housing units with the following characteristics:

a) with up to 180 (one hundred and eighty) days of "occupancy permit";

b) with more than 180 (one hundred and eighty) days of "occupancy permit", which have not been subject to occupation or negotiation;

c) used properties.

XII - Financing for the acquisition of used properties is limited to an amount equivalent to 25% (twenty-five percent) of the resources that the financial agent must necessarily allocate to applications of the Housing Financial System (SFH).

XIII - The 25% (twenty-five percent) limit referred to in the previous item is temporarily increased, until June 30, 1988, to 40% (forty percent).

XIV - The balances of real estate financing operations, to which this Resolution refers, shall have update clauses linked to the indices updating savings deposits.

XV - The update of the balances referred to in the previous item shall be carried out on the same date and with the periodicity stipulated contractually for the payment of installments.

XVI - Allow the update of savings deposit update indices in financing operations classified in the free range mentioned in item "c" of item I of this Resolution.

XVII - In the alienation of financed properties under the conditions of the Housing Financial System (SFH), agents may classify the contract entered into with the new borrower within the said System, in the manner to be regulated by the Central Bank.

XVIII - Financing to builders for property production shall have a maximum effective remuneration of 13% p.a. (thirteen percent per year), if the property under construction, or to be constructed, is composed of housing units whose prices for sale to the final buyer or borrower are limited to the value of 10,000 (ten thousand) OTN.

XIX - The Central Bank may reduce the maximum sale price provided in item "e" of item III and item "f" of item IV of this Resolution, establishing differentiated values based on the level of economic development of the regions into which the Housing Financial System (SFH) is divided.

XX - The credits of the agents of the Brazilian Savings and Loan System (SBPE) with the Liquidity Guarantee Fund for Deposits and Real Estate Letters (FGDLI), by absorption of savings accounts, shall be deducted from the balances of raised resources for the purpose of calculating the mandatory reserve and the limits referred to in this Resolution.

XXI - Admit the granting of financing, within the Housing Financial System (SFH), including for the purpose of covering the Wage Variation Compensation Fund (FCVS), for negotiations in progress before the publication of this regulation, under the conditions to be established by the Central Bank.

XXII - The Central Bank is authorized to issue norms, adopt the measures necessary for the execution of the provisions of this Resolution, as well as to regulate the financing operations of the Housing Financial System (SFH), including with respect to the following aspects:

a) maximum value per housing unit;

b) maximum financing term;

c) maximum commitment of gross family income;

d) amortization regime employed;

e) collection of resources not applied in the manner of item "b" of item I and items "b" and "c" of item II of this Resolution.

XXIII - Give new wording to item X of Resolution No. 1,298, of March 26, 1987, which regulates the linked passbook:

"X - The resources arising from the raising in the deposit modality established in this Resolution shall obey the direction fixed for the other savings deposits."

XXIV - The remaining regulatory provisions relating to housing financing are maintained, insofar as they do not conflict with this Resolution.

XXV - This Resolution shall enter into force on the date of its publication, with Resolutions No. 1,221, of November 24, 1986, No. 1,254, of January 28, 1987, No. 1,310, of April 24, 1987, No. 1,330, of June 4, 1987, and item II of Resolution No. 1,253, of January 28, 1987, being repealed.

Brasilia-DF, July 30, 1987

Fernando Milliet de Oliveira
President