As a result of the 29.3 percent increase in housing credit over the last 12 months, IBEDEC has reported a visible increase in the number of people seeking advice as to how to deal with the issue of mounting arrears.
The organization is keen to inform that potential borrowers need to be particularly aware of their obligations: “before accepting any kind of housing loan it should be remembered that, in case of loss of income or unemployment, there is no contractual clause that protects the consumer – except for loans under the Minha Casa, Minha Vida (My House, My Life) program – which guarantees payment of arrears in the event of job loss,” commented José Geraldo Tardin, president of the organization.
The main causes of the problem, according to Tardin, are a lack of adequate financial planning and the concessions on behalf of banks without true understanding of the payment ability of the borrower.
“The arrears are inevitable and financial firms profit from it, charging interest as well as late penalty charges knowing that sooner or later that they will be protected by the country’s credit protection laws,” said Tardin.
The law in Brazil allows for no more than three delayed payment before the property is officially repossessed and placed on the auction markets for resale – the borrower will lose any installments paid regardless of the banking institution. Tardin and the trained staff at IBEDEC have been offering worried borrowers some suggestions in terms of potential mitigation:
(i) Make use of the Guarantee Fund for Length of Service (FGTS, Fundo de Garantia por Tempo de Serviço) which will enable repayment amounts to be reduced;
(ii) Brazilian employment law stipulates for a compulsory 13th salary to be legally awarded, which can be used to clear arrears;
(iii) Make contact with the bank to discuss potential payment rescheduling and/or contractual revision.
The organization is urging potential mortgagees in Brazil to not be fooled by marketing campaigns touting that managing credit is ‘easy’ as well as to the take time to understand all future obligations with regards to home ownership (local property taxes, condominium charges, maintenance costs and other auxiliary payments).
The IBEDEC is also currently assisting borrowers in the predicament of mortgage arrears in court and commented that a few have been able to negotiate down their monthly commitments and cancel legal charges, arguing against the nefarious procedures and corporate interests of the Brazilian banking institutions.
Ruban Selvanayagam is a Brazil real estate and land specialist. For free e-books, state guides, up-to-date statistics, strategies, interviews, articles, weekly broadcasts and more head to the Brazil Real Estate and Land Investment Guide via the following link: http://www.brazilinvestmentguide.com/brazil-property-real-estate-land/