Savings schemes to finance housing in Brazil · • Below mkt interest rates • Min. 56% earmarked...
14
IUHF World Congress Washington DC, 2017 Claudia Magalhães Eloy Savings schemes to finance housing in Brazil
Transcript of Savings schemes to finance housing in Brazil · • Below mkt interest rates • Min. 56% earmarked...
IUHF World Congress Washington DC, 2017 Claudia Magalhães Eloy
Savings schemes to finance housing in Brazil
IUHF World Congress Washington DC, 2017 Claudia Magalhães Eloy
The National Housing Finance System (SFH)
Savings & Loans System (SBPE): • Voluntary savings • Below mkt interest rates • Min. 56% earmarked for housing loans • SFH loans - ir and house price caps • Commercial banks
Total: BRL$ 1 trillion
Time Served Guarantee Fund (FGTS) “workers’ indemnity fund” • Compulsory savings • Below mkt interest rates • Min. 60% earmarked for housing loans • Public banks (CAIXA & BB)
Nov 2016
[NOME DA CATEGORIA]
BRL[VALOR]billion [NOME DA
CATEGORIA] BRL[VALOR]
billion
IUHF World Congress Washington DC, 2017 Claudia Magalhães Eloy
Advantages: Large scale low cost funding source – affordable financing Stable and well established source of funding
%
7,3 8,2
0
5
10
15
20
25
30
35
40
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Stock of savings’ deposits (SBPE) as a % of GDP: 1995/2016
SBPE/PIB (%) Tbonds Savings Remuneration
The Savings & Loans System (SBPE)
IUHF World Congress Washington DC, 2017 Claudia Magalhães Eloy
Disadvantage: Vulnerability - loss of net inflow since jan/2015
Vector Error Correction Model. Variables: quarterly stock of savings deposits; difference from deposits’ remueration to the reference rate (SELIC); Extended labor incomes. BRL$ of Mar/2017. Authors: Claudia M Eloy; Henrique B Paiva; Marcos Vinicius Barroso, Mar/2017.
• economic recession • relatively low remuneration of deposits
*Values in billions of December, each year, except for 2017.
Net inflow
/ year
Nominal
values
Inflation
(IPCA)
Real Value
March/2017
2013 54,3 466,8 27,50% 595,3
2014 23,8 522,3 19,70% 625,2
2015 50,1 509,2 8,34% 551,7
2016 31,2 516,0 1,27% 522,5
2017 12,7 512,4 512,4
The Savings & Loans System (SBPE)
IUHF World Congress Washington DC, 2017 Claudia Magalhães Eloy
Savings deposits composition:
The Savings & Loans System (SBPE)
[PORCENTAGEM]
[PORCENTAGEM]
[PORCENTAGEM]
[PORCENTAGEM]
[PORCENTAGEM]
Distribution of savings funds
from BRL$0.01 to BRL $2,000
from BRL $2,000.01 to BRL $20,000
from BRL $20,000.01 to BRL $50,000
from BRL $50,000.01 to BRL $1 million
Over BRL$ 1 million
Account balance:
110.8 million accounts
2.6 million accounts
4.3 million accounts
Source of data: FGC, 2015 (1st semester census data). Includes “poupança rural” and SBPE.
IUHF World Congress Washington DC, 2017 Claudia Magalhães Eloy
9,5%
68,4%
29,9%
41,6%
14,9% 19,6%
38,4%
56,4%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
SBPE: Regulated Housing Loans (SFH) to Savings Funds (%)
Public Banks Private Banks All SBPE lending institutions
Disadvantage: Bank performance on required min. % of SFH’s mortgage loans – flexibility embedded in regulation
The Savings & Loans System (SBPE)
IUHF World Congress Washington DC, 2017 Claudia Magalhães Eloy
Disadvantage: Preference for non-SFH real estate loans over regulated housing loans – less affordable credit
*SFH ruling on mortgage loans: maximum interest rate of 12% and maximum home price (BRL $ 1.5 million)
238,3 277,7
64,0
114,2
0
50
100
150
200
250
300
350
400
Private Banks Public Banks
Funding (Dec/2016 in billion)
Savings Mortgage Bonds (LCI)
The Savings & Loans System (SBPE)
97,8
187,6
105,2
44,5
0
50
100
150
200
250
300
350
400
Private Banks Public Banks
Mortgage Loans (Dec/2016 in billion)
Regulated housing loans (SFH) Real estate loans (non-SFH)
IUHF World Congress Washington DC, 2017 Claudia Magalhães Eloy
The Savings & Loans System (SBPE)
The affordability issue:
-
2.000.000
4.000.000
6.000.000
8.000.000
10.000.000
12.000.000
14.000.000
130 180 230 280 330
Nu
mb
er o
f Fa
mili
es
Inclusion lines
8.6% (SFH's loans)
14% (non-SFH)
Term (months)
Average Interest rates*
Based on PNAD (IBGE, 2015) and Central Bank of Brazil. * average interest rates between mar/2012 and feb/2017 Authors: Claudia M Eloy; Henrique B Paiva; Mar/2017.
IUHF World Congress Washington DC, 2017 Claudia Magalhães Eloy
FGTS (worker’s indemnity fund)
Funding side: • Monthly contributions - 8% of worker’s salary • Account holders - formal workers • Remuneration of deposits at below market rates • Withdrawal restrictions • Funds = deposits + amortization of loans and spreads + investment returns • Council Board (CCFGTS) - members from Govt, Employer and Union representatives • Financial and operational management by CAIXA Lending side: • 60% of the anual budget approved by the CCFGTS earmarked for housing loans • Accessible to any family that qualifies, subject to income limits and house price caps • Pro-Cotista – special line of credit for account holders • Loan interest rates at below market rates • Exclusively by public banks • Larger LTVs and longer amortization terms
IUHF World Congress Washington DC, 2017 Claudia Magalhães Eloy
FGTS (worker’s indemnity fund)
0,0
5,0
10,0
15,0
20,0
25,0
30,0
35,0
40,0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
%
Total FGTS assets as a % of GDP - 2001/2016
FGTS assets to GDP ratio Basic Int Rate (Selic) IR paid to deposits
Advantages: Lowest cost funding source – most affordable financing Mandatory source of funding with withdrawal restrictions Main source of funding for moderate and low income housing
IUHF World Congress Washington DC, 2017 Claudia Magalhães Eloy
Recent Changes that reduce the focus of FGTS on social housing: • Family income limit raised from BRL$ 6,5 K to BRL$ 9 k; • Allow withdrawals for the acquisition of houses of up to BRL$1,5 million
FGTS (worker’s indemnity fund)
Disadvantages: Political pressure Unfairness to account holders
IUHF World Congress Washington DC, 2017 Claudia Magalhães Eloy
Funding Sources for Housing Finance
-
5,00
10,00
15,00
20,00
25,00
30,00
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Funding (FGTS, SBPE, CRI & LCI) to GDP (%)
SBPE's stock/GDP FGTS Assets/GDP LCI's Stock/PIB CRI's Stock/GDP
FGTS & SBPE – 80% of funding
CRI (Certificado de Recebíveis Imobiliários) = MBS LCI (Letra de Crédito Imobiliário) = Mortgage Bonds
Source of Data: CETIP, CAIXA and Central Bank of Brazil.
Housing credit to GDP: 10.7%
IUHF World Congress Washington DC, 2017 Claudia Magalhães Eloy
Funding Sources for Housing Finance
Covered Bonds in Brazil: Letra Imobiliária Garantida (LIG) Law 13.097/2015 Further regulation currently under final revision Estimated potential: Dual recourse Prospects in relation to LCIs: lower costs and longer terms
BRL $ 357 billion
IUHF World Congress Washington DC June, 2017
Thank you!
Claudia Magalhães Eloy
[email protected] [email protected]
Iguaçu Waterfals, National Park
