In less than a week, a decision from the Supreme Federal Court (STF) and the sanction of a law by the president Lula They came together to give more legal certainty to the rules on guarantees to be offered in loans and facilitate the recovery of assets. As a result, a reduction in the cost of credit in Brazil is expected.
On October 26, the STF finally decided that the Ley 9.514/1997, in force for 26 years, does not violate the principles of due process and broad defense and, therefore, is constitutional. The decision was made in sentence of the Extraordinary Appeal (RE) 860631with general repercussions (Topic 982).
This means that all courts in the country must follow the understanding of the Supreme Court, whenever a debtor questions the constitutionality of the law to try to avoid the extrajudicial foreclosure of a property. Hence, a reduction in the judicialization rates of these processes is expected.
For this topic, it is also important to mention that on October 30, the Ley 14.711/2023known as Legal Framework of Guarantees, which created the figure of the guarantee agent and allowed the same asset to be used as collateral in more than one loan application, within the surplus of the initial operation. Therefore, if the value guaranteed by a property in the first loan is up to 20,252.5 million dollars (100,000 reais as of December 12) and the original debt is USD 8,101 (40,000 reais), the debtor may contract a new loan of up to USD 12,151 (60,000 reais).
Don’t stop reading: Investing in El Salvador: overview of the real estate, tourism and technology sector
Turbocharged mortgage
“The correlation between Topic 982 discussed by the Supreme Federal Court (STF) and the Legal Framework of Guarantees is essential, since the validation of the extrajudicial execution of real estate guarantees by the STF, combined with the legislative changes introduced by the Framework Legal, establishes a clear direction for public agents and notaries. This coherence between jurisprudence and legislation enhances legal certainty, establishing a set of rules that guide the procedures related to the execution of guarantees in the real estate sector,” analyzes the lawyer. Kizzy Motamember of the Brazilian Institute of Real Estate Law (Ibradim).
The lawyer refers to the vote of the rapporteur, Minister Luiz Fux, for whom the extrajudicial execution of fiduciary disposal is an “element of regulatory policy that allows greater possibilities of access to real estate financing, at lower interest rates, so that The elimination of the legislative provision of the guarantee measure could represent an imbalance in this legislatively developed regulatory balance.” He also recalls that the legal framework regulates the extrajudicial foreclosure of the mortgage, “in a similar way to what has already been carried out in the context of fiduciary alienation.”
Thomas Whately, partner at HRSA Sociedade de Advogados, believes that the STF’s decision is important because it confirms a procedure that was already planned since the 1960s, with Decree-Law No. 70/1966. This rule established the mortgage title that provided for the guarantee in cases of operations included in the SFH. “And it already provided for the creditor’s option to go to court or extrajudicially.”
In his assessment, the Legal Framework of Guarantees, “a bill under discussion for a long time,” will make extrajudicial foreclosure even stronger than it already is, in addition to facilitating the “resurgence of the mortgage, which is has been driven”. Given the new law and the confirmation of the constitutionality of the 1997 law by the STF, he considers that banks are “more relaxed” with the entire process, which “can make guarantees cheaper.” On the other hand, it warns of the systemic risk posed by the possibility of offering the same property as collateral for more than one loan. “We’ve already seen what happened with subprime mortgages in the United States.”
The auction settles the debt
Even so, he considers that the risk is low, since banks should only grant loans for the same amount that they already offer for real estate credit. That is, if between 20% and 30% of the property must be paid at the time of the transaction by the buyer, the value of the loan made should not exceed 70% or 80% of the value of the property delivered. as a guarantee. Therefore, the greatest risk – and which has as a precedent the real estate crisis in the US – is a sudden drop in property prices, which could make it more advantageous for the debtor to lose the property than to pay the debt.
Other recommended reading: CTA: What are the transparency standards that companies in the US must comply with from 2024
The Legal Framework of Guarantees also changes the rules for extrajudicial auctions. The period for holding the auction has been increased from 30 to 60 days, and the auction, in a second auction, will observe the offer that is equal to or greater than the highest of the following values: the sum of the debt with expenses, fees notaries, insurance premiums, legal charges, taxes and condominium contributions; or, at the lender’s discretion, 50% of the appraised value. If the resources from the sale of the property are insufficient, the debt will be considered settled.
The HRSA partner also highlights the creation of a guarantee agent to which creditors can turn.
“Banks may hire a guarantee agent who will take care of the bureaucratic part of executing the trust sale or mortgage on their behalf. There will be a fee for this, but this will alleviate the problems.”
Judicial recovery
Regarding the decision of the STF, in the understanding of Armando Miceli, from Miceli Advogados, Law 9,514/1997 “guarantees the middle class, the main customer of this type of products, access to lower interest rates.” It reinforces that the law is “very old.” “If the Supreme Court declared unconstitutionality, there would be chaos. The decision is peaceful,” she comments.
Marcelo Terrapartner of Duarte García, Serra Netto e Terra Advogados, affirms that the issue considered by the STF was a “false controversy”, since the law did not comply with the principle of irrevocability of judicial control, which determines that the law will not exclude injury or threat to rights arising from the assessment of the Judicial Branch, as established in article 5, section XXXV, of the 1988 Federal Constitution. “The debtor can effectively access the Judicial Branch before, during and after the auction.”
You may be interested in: Development opportunities for the Dominican real estate sector
Also a partner of the firm,Caio Barbosa, is another that uses the words of Minister Fux, for whom, “in extrajudicial execution, the debtor is not called upon to defend himself, but to pay. And if you have arguments to challenge it, you can do so.” He highlights, however, that the extrajudicial foreclosure process only ends with the recovery of the property. “This must be done through judicial means.”
Recovery is an action whose procedures are established in the execution law itself. The judge may issue the reinstatement order, upon proof from the creditor that the extrajudicial execution was carried out.
“It hasn’t taken long, but there may be more particular cases,” explains the lawyer, recalling cases in which the property may have some social function, such as a hospital, for example, which will also be taken into account by the judge. It is a process that can last around six months, if the debtor decides to challenge it.
Ministers Edson Fachin and Cármen Lúcia voted against the constitutionality of extrajudicial execution. “This procedure, which grants exceptional powers to one of the parties in the legal transaction, disproportionately restricts the scope of protection of the fundamental right to housing,” said Fachin. According to the Brazilian Federation of Banks (Febraban), there are currently around seven million real estate loan contracts with personal mortgages, for a total value of 147,843.2 million dollars (730,000 million reais).
2023-12-13 00:26:09
#cost #real #estate #credit #Brazil #impacted #decision #STJ #Legal #Framework #Guarantees
