the institutions of housing financing in argentina - Inter

THE INSTITUTIONS OF HOUSING FINANCE IN ARGENTINA
Draft version in English
March 2003
Marcela Cristini1
Ramiro Moya2
SYNTHESIS
1. Characteristics of the Argentine mortgage market
The evolution of the mortgage credit to the housing market in Argentina underwent two
different episodes in the last twenty years. During the first episode, in the eighties, the
market showed a limited development due to the consequences of very high permanent
inflation on long-term loan availability. The demand for house ownership remained within
relatively high levels due to the fact that it was the main form of saving for the households
in Argentina but sales were, mostly, cash. House ownership was considered as an
effective tool to protect real savings in the context of negative real interest rates.
Consequently, the incentives to private investment in residential construction were very
poor and during this episode, this kind of investment fell by 5,8% per year. The access to
credit was rationed and interest rates were regulated. The mortgage market was based on
two pillars: the National Mortgage Bank (public bank in operation since the nineteenth
century) and the National Housing Fund, i.e., FO.NA.VI. In the first case, the inflationary
erosion of the Bank´s assets and the need for increasing financial assistance from the
Central Bank led to the suspension of its operations toward the end of the episode. In the
case of the FO.NA.VI, the main effect of the program was to provide high subsidies to the
beneficiaries of the system through charging below market interest rates and by admitting
high levels of non-performing loans. None of these institutions served with efficacy their
targeted population and both exhibited serious problems of management.
As a contrast, during the second episode, in the nineties, the macroeconomic stabilization
allowed for the “take off” of the mortgage market, whose volume increased around 12% in
real terms annually. Residential construction increased by 1,1% per year. New suburban
locations (country clubs with permanent residents in the outskirts of big cities) were
developed and re-sales helped an increasing filtering process. Mortgage credit stock
climbed up from an average of US$2.000 million in the eighties to US$8.000 million in the
nineties and from representing 1% of the GDP to 3%.
1
Senior Economist, FIEL (Fundación de Investigaciones Económicas Latinoamericanas-Latin American Economic
Research Foundation) e-mail: marcela@fiel.org.ar
2
Economist, FIEL, e-mail: ramiro@fiel.org.ar
This research is part of the IADB projecto “What is the State of Housing Finance in Latin America and the Caribbean”,
under the coordination of Arturo Galindo and Eduardo Lora, Research Department del Inter-American Development
Bank.
Figure 1
Argentina: Housing Mortgage Loans
(Stock in US$ millions )
PRÉSTAMOS HIPOTECARIOS PARA LA VIVIENDA*
12.000
4,5
4,0
10.000
8.000
3,0
Millones de $
2,5
% del PBI
6.000
2,0
4.000
% del PBI
En millones de $ de 2001
3,5
1,5
1,0
2.000
0,5
00
99
98
97
96
95
94
93
92
01
20
20
19
19
19
19
19
19
19
19
90
89
88
87
86
85
84
80
79
78
91
19
19
19
19
19
19
19
19
19
19
76
77
19
19
19
75
0,0
19
19
74
0
* Diciembre de cada año
The interest rates went down to pair an 11% in dollars, contracts were mostly denominated
in dollars, LTVs grew steadily to range between the 70 and 80% of property market value
and the mortgage contracts extended their length from two/five years to ten/fifteen years.
Household access to mortgage loans broadened considerably since mid-nineties supplied
by private commercial banks and a bunch of public banks.
TABLE 1
Argentina: Characteristics of Total Mortgage Lending
Note: 1. Mortgage loans (total) in US$ millions; 2. Structure by loan length in years; 3.
Share of dollar denominated loans; 4. Percentage of fix interest rate loans in total loans; 5.
Percentage of variable interest rate loans.
Características de los flujos de créditos hipotecarios totales
1993*
1) Monto de Préstamos
hipotecarios (1)
2) Distribución de Plazos
Hasta 5 años
Entre 5 y 10 años
Más de 10 años
3) Participación de créditos en
US$
4) Emisión de créditos a tasa fija
5) Emisión de créditos a tasa
variable
1994
1995
1996
1997
1998
1999
2000
2,189.3 4,426.8 2,985.5 3,929.9 4,846.6 4,751.6 3,418.6 4,412.8 2,753.6
74.7% 55.2% 62.3% 54.0% 46.6% 46.7% 34.3% 41.9% 26.5%
13.4% 32.0% 21.0% 20.0% 21.9% 22.3% 28.8% 21.0% 25.4%
12.0% 12.8% 16.7% 26.1% 31.5% 30.9% 36.9% 37.1% 48.1%
79.0% 85.7% 84.1% 91.0% 88.5% 90.2% 88.5% 95.3% 96.4%
44.8% 45.2% 46.6% 49.6% 49.5% 35.6% 22.8% 38.2% 36.4%
55.2% 54.8% 53.4% 50.4% 50.5% 64.4% 77.2% 61.8% 63.6%
Fuente: Elaboración propia en base al BCRA
(1) En millones de Pesos/Dólares (Ley de Convertibilidad), incluye comerciales y para la
vivienda.
* Período junio-diciembre.
2. Economic policy and legal framework
The development of the mortgage market was immersed in a new scenario characterized
by economic and financial reform. A banking system composed of private and public
banks provided “universal” commercial services to the economy and was at the center of
the financial sector. Along with an important concentration in banking structure in the
nineties3, banks also changed their business strategies. They specialized with respect to
client types. Several banks focused on lending to prime companies whereas other banks
tied their “customer relationship” with traditional medium companies. An ulterior feature
related to bank strategies was the development of specialized departments on pledges by
product (such as automobiles, manufacturing machinery, agricultural machinery) and on
housing mortgages Several institutions also showed their interest in the development of
warrants.
Enhanced prudential and supervision regulations were implemented as a key ingredient of
the economic reform and contributed to an early recovery of trust in the financial system
after the Tequila crisis. Along with international standards in banking supervision (Basle
standards) the Central Bank introduced novel “market-oriented” regulations to complement
3
2001
Argentina had 400 banks operating in the 80s, 136 during the 90s and 76 in 2001.
overseeing responsibilities of the banking system through investors, auditors and rating
agencies. The resulting regulatory framework combined financial market liberalization with
strict regulatory requirements. These requirements slightly favored the increase of
mortgage lending share in bank´s portfolio.
During the decade deposits and loans grew at a good pace, the domestic interest rate
showed a converging path to the international standard due to country risk reduction and
the banking system shifted lending from the government as a major client to the private
sector, particularly big firms and households. In 2000 banking loans (stock) represented
22% of GDP as compared to capital market financial instruments (commercial papers),
around 8%.
Since 1993 the housing mortgage market reappeared after a long period when economic
instability acted as a deterrent to its operation. The new macroeconomic environment
favored the development of the housing market. Building industry resumed growth
providing new housing to high and middle income households, the private banking system
increased the mortgage credit supply using their own funding or distributing National
Mortgage Bank funds (second floor banking institution at the time).
As regards the interest rates and despite the diminishing path that it exhibited after the
Tequila crisis, the average lending rate in Argentina remained high by international
standards. Spreads in dollars and in pesos calculated as the difference between lending
and deposits interest rates also remained high. It may also be noted that interest rates
show an important variation across banks that cannot be explained by the heterogeneity of
financial product mix and that this variation dominates the variation along time.
The following Table suggests that the very high interest rates in Argentina be essentially
due to personal loans and to overdraft facilities. According to available analysis on these
financial instruments, the structure of the corresponding interest rates reflects risk implicit
in these lending contracts. Loans secured on collateral (pledges), mortgages and loans
advanced on documents (bill discounted) were all below the average. Mortgage lending
and pledges attracted lower rates due to the presence of the real guarantee and in spite of
the shortcomings of the judicial system in the country.
TABLE 2
INTEREST RATES
(annual %)
Note: Titles in columns correspond to: 1. Prime rate(30 days);2. Overdrafts; 3. Discounting
Bills; 4. Mortgages; 5. Pledges; 6. Personal loans; 7. Average Lending Rate; 8. Deposit
rate; 9. Country risk (basic points)
Tasas de interés en moneda extranjera
(% anual)
1993
1994
1995
1996
1997
1998
1999
2000
Prime 30 Adelantos
Tasa
Tasa Riesgo
días
en Cta. Documentos
activa Pasiva país
sola firma Hipotecarios Prendarios Personales promedio
Cte.
(pbs)
(Argentina)
8,1
19,7
13,4
16,2
17,2
20,6
15,1
5,8 318
9,8
21,2
14,8
15,5
17,4
20,4
16,0
6,1 787
10,8
17,7
14,7
15,7
17,3
24,2
16,4
7,4 1113
8,8
14,0
11,2
13,0
15,1
22,2
13,5
6,0 500
8,6
14,4
11,0
11,9
14,7
21,3
12,9
6,5 418
9,3
11,2
11,9
12,6
13,4
21,8
13,2
6,7 706
10,3
10,7
13,4
13,3
15,1
23,1
14,5
7,1 665
9,4
8,9
11,9
12,6
15,4
24,0
13,5
6,9 794
Tasas de interés en moneda nacional
1993
1994
1995
1996
1997
1998
1999
2000
1/
(% anual)
Prime 30 Adelantos
Tasa
Riesgo
Documentos
Tasa
Hipotecarios Prendarios Personales activa
días
en Cta.
país 1/
sola firma
Pasiva
Cte.
promedio
(Argentina)
(pbs)
10,4
36,8
20,6
16,6
22,4
38,6
33,5
8,7
318
13,6
36,6
21,2
16,0
25,1
37,9
33,3
9,6
787
12,2
37,9
16,1
13,4
23,4
42,1
33,9
9,2
1113
10,5
30,5
13,5
12,5
21,5
40,1
28,3
7,6
500
12,6
29,6
14,2
14,2
17,5
34,4
27,1
8,3
418
10,8
30,6
13,6
15,7
22,2
25,0
27,8
8,1
706
13,4
31,0
13,3
14,7
20,3
32,3
26,7
10,3 665
10,0
29,2
11,6
15,4
21,6
33,1
25,3
7,9
794
Medido por el Embi.
Fuente: Elaboración propia en base a datos BCRA.
To understand the relevance of the mortgage market in Argentina it is useful to know the
structure of the housing market . In 1995, approximately 70% of Argentine households
owned their own houses. Half of these properties were built or bought new by their current
owners, the other half corresponded to house re-sales. Only 12 % of households held
debts originated in housing investment (buying or renovation). There was no record of the
source of their funding, though the estimates suggest that most of it corresponded to bank
loans. Only 12 % of households rented their house and this share has been stable for at
least a decade .
In 2001, the mortgage market amounted to 4,5% of total loan contracts in the banking
system equivalent to 505.000 contracts with an average loan of US$31.774. The average
contract was below this latter figure for loans granted by private banks (US$ 28.300) and
above for loans granted by public banks (US$39.412). Average non-performing loan ratio
was 17% of total loans and mortgage loans were slightly below that ratio, exhibiting a 16%
non-performing loan ratio.
In synthesis, during the nineties the Argentine financial system evolved towards the
recovery and “take off” of the mortgage credit to finance house ownership. Which are the
reasons behind this evolution? Several hypotheses are identified by our analysis:
1. Macroeconomic stability and market oriented policies in the financial system were the
main determinants of the increase in deposits and decrease of nominal interest rates.
The availability of increasing lending funds determined the increase of all kinds of
loans including mortgages.
2. Price stability and economic predictability allowed to extend loans over longer periods.
In the case of mortgage, loans were granted over a ten to fifteen years period.
3. The possibility to denominate mortgage contracts in dollar terms help the extension of
repayment period and improved the value of the collateral over time.
4. The increasing share of foreign private banks in the domestic financial system, pushed
competition and help decrease the interest rate.
5. The legal framework put in place to launch for securitization potentially enabled the
development of a secondary mortgage market.
6. The organization of a public credit bureau and the existence of private supply on
debtor´s information provided banks with convenient tools to select proper households
to allocate new loans.
The microeconomic analysis of bank behavior in the mortgage market also shows very
interesting features during the period:
¾ Impressive increase of deposits in the banking system as compared with Argentine
past financial evolution changed the dynamics of lending decisions;
¾ Privatization of public banks including the National Mortgage Bank reduced distortions
in mortgage allocation and levelled the playing field for all banks participating of the
mortgage market.
¾ Foreign private banks, particularly the Spanish ones, were interested in developing the
mortgage market counting on their home country experience and know-how. They
used the mortgage loan to attract new clients and as a distinctive product of their
financial service package to customers.
¾ Mortgage loan contracts were modernized by enacting a new law to protect creditors
rights that included an extrajudicial process of loan recovery.
During this period the ten top banks of the system concentrated 75-80% of total mortgage
loans.
TABLE 3
Indicators of Banking Concentration in the Mortgage Market
December 2001
Note: Column 1, Total amount in thousand dollars; Column 2, Share of top ten banks in
the Mortgage market; Column 3, Share of top five banks; Herfindahl Index
Indicadores de concentración en el mercado de créditos hipotecarios totales
Diciembre de 2001
Monto
(en miles US$)
1995
1996
1997
1998
1999
2000
2001
9,992,518
10,965,898
12,562,350
15,457,233
6,028,939
7,051,839
16,059,782
Participación Participación
de los 10
de los 5
Indice de
primeros
primeros
Herfindahl
bancos
bancos
77.9%
66.8%
1,625
78.3%
67.3%
1,598
79.4%
64.2%
1,313
82.5%
65.3%
1,172
79.5%
62.9%
1,090
74.8%
59.2%
963
79.4%
62.8%
1,087
Fuente: Elaboración propia en base a datos BCRA.
One of the consequences of increasing competition among a bunch of large banks was
the availability of improved information by potential clients through advertising and direct
contact with well-trained credit officers. This helped to reduce the level and dispersion of
interest rates among financing institutions and over time. Administrative costs charged on
mortgage also diminished noticeably.
TABLE 4
Administrative charges charged by banks on mortgage loans
Gastos bancarios del crédito hipotecario *
Máximo Mínimo
1998 4,9%
1,11%
2001 2,27%
1,81%
Fuente: Elaboración propia sobre datos Secretaría de Competencia.
*
Sobretasa calculada como puntos adicionales a la tasa de interés en
operaciones hipotecarias a tasa fija en créditos de US$ 40.000 a 10 años
Considering our description of the mortgage market during the nineties we elaborated
several hypotheses on the demand and supply behaviors and provided with an estimation
of the reduced form of the market. We also estimated the structural equations
corresponding to alternative specifications of the mortgage demand and supply not
included here.
TABLE 5
Variable dependiente: DLOG(HIPTOMOSA)
Muestra (ajustada): 1993-08; 2001-12 (101 observaciones)
Método: LS-White Heteroskedasticity-Consistent Standard Error and
Covariance.
VARIABLE
ECUACION 1
ECUACION 2
COEFICIENTE COEFICIENTE
(t-estadístico) (t-estadístico)
C
DLOG(WSA)
LOG(Q/ICC)
1.428
2.305
0.620
1.832
-0.495
-1.930
DLOG(DES)
BHIPOT
ESP_HIPOT
DLOG(CPRESTMA(-6))
LOG(EMBI)
AR(1)
R-cuadrado
R-cuadrado ajustado
Estadístico Durbin-Watson
Estadístico F
Prob(F)
-0.285 *
-1.579
-0.222 *
-0.786
0.635
2.098
-0.025
-2.997
-0.024 *
-0.158
0.432
0.389
1.978
10.094
0
0.960
1.701
0.597
1.758
-0.401
-1.750
-0.138
-1.633
-0.031 *
-0.267
0.820
2.495
0.010 *
0.073
0.404
0.366
1.952
10.626
0
ECUACION 3
COEFICIENTE
(t-estadístico)
1.533
2.323
0.583
1.696
-0.560
-1.958
-0.099
-1.031
-0.218
-1.028
-0.099
-0.280
0.623
2.099
-0.021
-2.481
-0.039
-0.266
*
*
*
*
0.440
0.392
1.981
9.049
0
* No significativa al 10%.
The definition of variables is the following:
HIPOTMOSA : stock of mortgage credit for housing in dollars, seasonally adjusted.
TASHIP: mortgage interest rate in nominal terms.
WSA: monthly nominal wage, seasonally adjusted
Q/ICC: price of dwelling by m2 / cost of construction
DES: number of unemployment subsidies allocated by month.
BHIPOT: share of the National Mortgage Bank in total mortgage lending.
D94-96: dummy to control for the Tequila crisis
CPRESTMA: lending funds in the banking sector, moving average.
EMBI: country risk indicator
DOPTIMO: dummy to control for peak in business cycle in 1997- 1998.
ESP_HIPOT: share of Spanish banks on total mortgage lending.
Our estimates show that the demand for mortgage loans responds with a low elasticity
(negative) to the interest rate and is relatively elastic to income. The unemployment rate
growth and mostly, the dwelling real price diminished the demand for housing finance
during the period. The market widened as a consequence of the previous increase in
banking lending capacity and it was modestly, but negatively, affected by macroeconomic
risk.
The level of economic activity and the competition with other financing applications within
the banks´ portfolio did not affect the mortgage credit. From the bank´s viewpoint the
mortgage loan shows a low financial risk and a high diversification capacity which
compensated its lower yield. In fact, the mortgage was the only financing instrument that
did not undergo the “crowding out effect” from the public sector that was increasing its
indebtedness with the banking sector heavily during the final period of the decade. To
illustrate these aspects we considered the changes in the portfolio structure of the banking
system during the period in the following Table.
TABLE 6
Argentina: Portfolio structure indicators of the banking system
Note: 1. Structure in Jan-1994; 2. Structure in Jan-00; 3.Average yield during the period;
4. Variability Coefficient of yield; 5. Beta coefficient:; 6. Correlation coefficient between the
share of each alternative financial instrument and the share of mortgage loans in the
banking system portfolio
Indicadores del portafolio de los bancos
Composición Composición
Inicial En-94 Final En-00
(1)
(2)
Adelantos
11%
Overdraft
Descuentos
27%
Discount bills
Hipotecarios
13%
Mortgage
Prendarios
6%
Pledges
Personales
9%
Personal loans
Otros
8%
Other
Valores
Privados
2%
Commercial
papers
Sector Público
24%
Loans to the
public sector
Total Promedio
100%
Total/ Average
Fuente: Elaboración propia.
Coeficiente de
Rendimiento
Variabilidad
promedio del
del
período
Rendimiento
(3)
(4)
β
(5)
Correlación entre
las participaciones
en la cartera de cada
instrumento con la
hipoteca
En-94/00
(6)
6%
31,3
82,2
1,6
0,35
22%
13,5
79,1
1,0
-0,73
16%
13,9
14,8
0,4
1
6%
16,6
29,0
0,6
s.d.
10%
32,6
29,7
0,7
0,47
7%
24,2
60,3
1,2
-0,42
4%
9,5
78,7
0,6
0,84
29%
14,2
76,5
0,9
0,71
100%
17,7
9,4
nc
nc
3. The role of the judiciary and the legal costs of mortgage recovery
During this episode the evolution of the mortgage market does not seem to have
confronted any important institutional obstacle. However, the operation of the credit
market (its volumes and costs) is influenced by legal regulations that define the credit
contract and the rights and obligations of debtors and creditors. In Argentina these
contractual relationships have a solid grounding in law. Thus, this section is devoted to
analyzing legal and judicial procedures in order to assessing their influence on the
mortgage market.
Many of these contracts, such as pledge loans, mortgages, warrants, letters of credit, etc.
have a long history in Argentine legislation (since the end of the 19th Century), although in
some cases the laws governing them have been modified to ensure they are adapted to
new market developments. Other instruments, such as trusts (included in the reform of
the mortgage contract, Law 24,441) and the changes to the law on bankruptcy (Law
24,432) have arisen in the context of economic reforms with the aim of creating new
markets (securitization) or flexibilizing the use of economic resources (introduction of
cramdown in bankruptcies).
In Argentine banks are able to bring so-called “administrative proceedings” for loan recovery
in cases where loans have been granted against a pledge or a mortgage. Without bringing a
court case to execute the pledge or foreclose the mortgage the bank can request the judge
to authorize the seizing of the asset, which is auctioned off, the proceeds being notified to
the judge. If the collateral does not cover the value of the amount due, the bank can initiate
executive action (which is a court proceeding) to recover the balance, proceeding against
the debtor and/or his guarantor. This possibility for “administrative execution” is not available
to other kinds of creditors, who must of necessity resort to legal action to protect their rights.
In Argentina bank loan contracts are defined and regulated by codes and national laws. In
contrast, because of the federal nature of the country, enforcement of these regulations is
in the hands of independent judicial powers in each province (24 in total and a federal
jurisdiction for inter-provincial matters) set up according to the respective Provincial
Constitutions.
Naturally, the efficacy of contractual regulations depends not only on the norms they
contain but also on their interpretation and application by the courts. Uneven approaches
by local courts can lead to differences in access to credit and in their cost if the parties
anticipate difficulties in the resolution of conflicts arising out of the loan contracts. Such
difficulties can take the form of excessive costs of the legal process, slow or partial debt
recovery or in a general increase in uncertainty regarding results. To illustrate on the
disparity of costs between provinces we have collected data from a sample of judicial
cases covering several provinces. Our conclusions are the following:
¾ There are not significant differences between the amount claimed and the one
recovered through the judicial procedure. Administrative execution of loans is a recent
legal procedure and it has not been tested enough in practice.
TABLE 7
Recovered amount/ claimed amount in percentage
Note: Province, Pledge execution, Housing Mortgage forclosure, Other Mortgage
forclosure
Proporción del monto dictado por la sentencia en relación al monto demandado
Indicador
Capital Federal Media
Catamarca
Media
Chaco
Media
Corrientes
Media
Entre Ríos
Media
La Rioja
Media
Mendoza
Media
Misiones
Media
San Luis
Media
Santa Cruz
Media
Santa Fe
Media
T. del Fuego
Media
Nro. de Observaciones totales
Ejecución
Prendaria
Ejec.Hipotec. de Ejec.Hipotec. de
crédit.p/vivienda Otros créditos
93%
98%
97%
94%
97%
96%
100%
100%
99%
100%
100%
100%
100%
100%
100%
94%
93%
94%
100%
100%
100%
100%
100%
100%
100%
n.d.
72%
99%
n.d.
99%
n.d.
n.d.
99%
100%
n.d.
100%
70
75
119
Fuente: FIEL (1999).
¾ Legal costs are very different among provinces. Court tax rates vary not only between
jurisdictions but also with regard to the basis for calculation, using either the amount of
the claim (with or without limits), the nominal principal or the restated principal. In the
case of the seizure of pledges, there is no tax in some jurisdictions (7 out of 24) and in
3 cases it reaches a maximum of $ 90 when the court and filing taxes are added
together. Contributions to the College of Lawyers vary according to jurisdiction. Some
make no charge, others charge a fixed amount of between $ 4 and $17.50, and others
charge percentage surcharges on the court tax or very significant direct percentages
equivalent to an additional court rate of 2% on principal.
¾ In the case of registry costs, information available on property registers indicates that
not only is the cost significant in some jurisdictions but there are sometimes delays in
the processing of registrations that in extreme cases can run to several months.
Vehicle registries are governed by federal law, so that costs are uniform in all
jurisdictions. The cost of publishing edicts varies widely from jurisdiction to jurisdiction,
as does the method use to set prices (by line, by character, etc.) and it is difficult to
establish an average value per jurisdiction. Publications in the Official Gazettes of
each jurisdiction can cost between $ 120 and $ 600. A similar range can be found in
the case of publications of edicts in the newspapers with the largest circulation in each
jurisdiction.
¾
Analyzing the costs of bringing a lawsuit (court taxes and College of Lawyerls fees,
including the contributions to professional welfare funds) and expenses during the
proceedings for selected locations in the case of pledge seizure and mortgage
foreclosure, the results are the following:
TABLE 8
Legal costs of credit judicial recovery
Costos judiciales en la ejecución de créditos
Caso: Ejecución hipotecaria (Mortgage foreclosure)
Monto del litigio (Claimed amount): U$S 200.000.
Jurisdicciones Seleccionadas
Jurisdicción
Cap. Fed.
Pcia. Bs. As.
Córdoba
Mendoza
Gastos inicio
Edictos y Aportes Caja de
Costos de
Total de
(tasa de just., Embargo Certificados
Abogados
tramitación y
Costos
Caja, etc.)
de dominio
s/honorarios gastos (aranceles) Judiciales
6,000
4,866
10,015
9,000
420
864
50
13
1,500
1,500
1,500
1,500
no
3000 (*)
no
no
300
300
300
(1)1300
8,220
10,530
11,865
11,813
Total del
gasto
como %
del litigio
4.1%
5.3%
5.9%
5.9%
(*) 10% de aportes calculado sobre honorario promedio (15% del monto del litigio)
Nota: Se excluyen gastos de escrituración y honorarios profesionales
(1) Corresponde al 0.5% por tasa de apelación o incidente que planteen las partes.
Caso: Secuestro prendario (Pledge seizure)
Monto del litigio: U$S 20.000.
Jurisdicciones Seleccionadas
Jurisdicción
Cap. Fed.
Pcia. Bs. As.
Córdoba
Mendoza
Gastos inicio
Edictos y Aportes Caja de
Costos de
Total de
(tasa de just., Embargo Certificados
Abogados
tramitación y
Costos
Caja, etc.)
de dominio s/honorarios gastos (aranceles) Judiciales
70
510(*)
1015(*)
73
No
No
No
No
500
500
500
500
no
300 (**)
no
no
250
250
250
250
820
1,560
1,765
823
Total del
gasto
como %
del litigio
4.1%
7.8%
8.8%
4.1%
(*) Tasa de ley aplicada s/ el monto del litigio. No es criterio uniforme en toda la Pcia.,ya que en algunas jurisdicciones,
se lo considera proceso con monto indeterminado, con un costo de $31 en Bs.As., y $102 en Córdoba.
(**) 10% de aportes calculado sobre honorario promedio (10% del monto del litigio)
Nota: No se incluyen gastos de transferencias y honorarios profesionales.
Fuente: FIEL (1999).
¾ Auction costs are particularly high in Argentina, doubling the legal costs of the whole
recovery process.
TABLE 9
Judicial loan recovery costs including auction costs
Costos judiciales en la ejecución de créditos, incluyendo los costos de subasta
Caso: Ejecución hipotecaria (Mortgage foreclosure)
Monto del litigio: U$S 200.000.
Jurisdicciones Seleccionadas
Gastos subasta
(comisión
Jurisdicción
martillero,
etc.)+21% IVA
Cap. Fed.
7,260
Pcia. Bs. As.
7,260
Córdoba
14,520
Mendoza
7,260
Total de
Costos
Judiciales
TOTAL
8,220
10,530
11,865
11,813
15,480
17,790
26,385
19,073
Nota: Se excluyen gastos de escrituración y honorarios profesionales.
Total como % del
litigio
7.7%
8.9%
13.2%
9.5%
Caso: Secuestro prendario (Pledge seizure)
Monto del litigio: U$S 20.000.
Jurisdicción
Cap. Fed.
Pcia. Bs. As.
Córdoba
Mendoza
Jurisdicciones Seleccionadas
Gastos subasta
Total de
(comisión
Total como % del
TOTAL
Costos
martillero,
litigio
Judiciales
etc.)+21% IVA
2,420
820
3,240
16.2%
2,420
1,050
3,470
17.3%
2,420
1,765
4,185
20.9%
2,420
823
3,243
16.2%
Nota: No se incluyen gastos de transferencias y honorarios profesionales.
Fuente: FIEL (1999).
¾ As regards the importance of professional fees, there are marked differences in the
percentages applied in the various jurisdictions. In Córdoba for example awards are
made of up to 30% of the amount claimed, whereas in San Luis there is a cap of 16%
on the amount claimed.
TABLE 10
Lawyer fees and judicial costs in loan recovery as % of claimed amount
Pledge execution and Mortgage foreclosure
Importancia relativa de los costos y honorarios relevados.
Como % del monto demandado (capital + intereses)
Jurisdicción
Capital Federal
Bs. As.
Catamarca
Chaco
Córdoba
Corrientes
Entre Ríos
La Rioja
Mendoza
Juicios Ejecutivos
Otros costos
Honorarios
judiciales del
trámite
Intervalo Observado
8.7%-3.1%
21.8%-4.4%
28.7%-14.0%
41.9%-11.3%
7.7%-5.5%
31.9%-7.9%
22.2%-15.6%
24.1%-18.8%
25.0%-14.7%
30.9%-26.0%
22.0%-19.0%
26.3%-22.2%
15.1%-9.4%
18.3%-13.4%
12.0%-6.4%
12.9%-6.4%
20.4%-12.5%
24.6%-17.0%
Ejecuciones Hipotecarias
Otros costos
Honorarios
judiciales del
trámite
Promedios
7.9%
8.0%
n.d.
n.d.
18.9%
20.6%
20.2%
20.3%
n.d.
n.d.
13.5%
18.2%
9.6%
13.5%
7.1%
7.6%
7.6%
9.6%
Nro. de
Observaciones
Totales
179
145
65
42
47
48
54
47
75
Fuente: FIEL.
Nota: Juicios Ejecutivos comprende a los ejecutivos en general, ejecuciones por cuentas corrientes, por
pagarés, P.V.E. y a las ejecuciones prendarias.
¾ Delays in recovery (in most cases lawsuits are excessively drawn out) often lead to
banks accepting settlement proposals involving high discounts rather than taking a
legal path entailing considerable risk of dispossession or disappearance of the debtor
that the length of such processes encourages. In addition, in many cases, such as
vehicle pledges, guarantees become obsolete. In several jurisdictions the courts
determine the initiation of trial proceedings for enforcement actions in the face of any
delaying action by the debtor, in spite of the fact that all procedural rules institute the
right of either of the parties to subsequent trial proceedings. The provinces are more
likely than the Federal Capital to take a case to trial.
¾ Lastly, in the following table there is a comparison between the provinces declared by
the banks to have the “worst performance” and those considered to have the “best
performance” with regard to time-frames and percentages of recovery of the amount
claimed net of court costs and fees.
TABLE 11
Delays and net recovery of loans
Plazos promedio y porcentaje de recuperación del préstamo
Comportamiento de
las provincias
(casos extremos)
Juicios Ejecutivos
Secuestros prendarios
Ej. hip. para la vivienda
Ej. hip. de otros créditos
Otros
A- PEOR COMPORTAMIENTO
B- MEJOR COMPORTAMIENTO
PLAZO EN MESES
PLAZO EN MESES
Inicio
%
de
Inicio hasta % de recu- Inicio hasta Inicio hasta
hasta
recupero
subasta
pero neto sentencia subasta
sentencia
neto
10,8
21.8
20%
4,0
11.8
42%
2,3
8.6
55%
1,5
4.7
67%
9,5
18.4
67%
4,0
9.8
75%
12,5
24.0
56%
3,5
11.5
63%
36,0
48.0
10%
18,0
24.0
40%
Fuente: FIEL (1999).
The differences in legal costs and judicial efficacy in loan recovery have an impact on
credit availability by region. In the case of mortgage loans this impact is suggested by the
negative relation between the share of bank debts (personal and mortgage loans) of
households and an indicator of judicial efficacy constructed using the previous data.
FIGURE 3
Share of bank debts (personal and mortgage loans) of households related to indicator
of judicial efficacy (the highest the index, the lower the efficacy)
EFICACIA JUDICIAL Y ENDEUDAMIENTO DE LAS FAMILIAS
45
Deuda como % del ingreso familiar
40
35
30
25
20
15
10
5
0
0,0
0,2
0,4
0,6
0,8
1,0
Índice de Justicia (a mayor índice, menor eficacia)
4. The perspectives of the mortgage market in Argentina
Due to the fact that toward the end of the nineties the housing mortgage finance presented
an increasing trend it was unusual to find critics to its performance. In all, it was possible
that the growth of the market was to face some obstacle in the future due to the scarce
activity of banks in securitization and to the concentration of the suppliers to one sole kind
of entity, banks. Some market operators point to a poor financing supply in the housing
markets of smaller urban conglomerates where informal credit was organized through the
notaries that covered both the financing of modest LTVs and the expenses of dwellings
maintenance. Neither did appear intermediaries that allowed a major market coordination
or favored the enlargement of banking business scale such as housing developers or
mortgage originators for direct securitization in the capital market.
In 2002, mortgage market development was abruptly interrupted by a severe
macroeconomic crisis which ended in the default of the external debt and in a huge
devaluation of the Argentine peso. The country abandoned the convertibility rule and
adopted a floating exchange rate. This new scheme ended the second episode of
mortgage market take off due to the breach of the mortgage contracts. This situation was a
consequence of “pesification” through which dollar denominated contracts were converted
into peso denominated contracts using a discretionary exchange rate (1,4 pesos = US$1
1,2
as compared to the market exchange rate of 2,5 pesos per dollar). This arrangement
benefited indiscriminately the debtors producing an income transfer from creditors and risk
investors. The suspension of executions, in time, eliminated momentarily the possibility of
credit recovery. Under these conditions it is extremely difficult to assess up to what degree
the crisis has affected the mortgage market which has been paralyzed since then.
Considering the immediate future, re-structuring of the mortgage market will depend on the
way in which the financial market will be re-organized. Firstly, if the monetary regulations
allow for dollar denominated contracts, the mortgage credit could be denominated in hard
currency and consequently, protected from inflation. Alternatively, if loans can solely be
denominated in pesos it would be convenient the introduction of an accounting unit for
denomination such as the Chilean UFs to protect the contract from inflationary erosion.
Secondly, in the short run it will be very difficult to reduce the transaction costs derived
from contract disruption and the interest rates to the levels prevailing in the nineties.
Consequently the reconstruction of the market will be limited by the reduced length of the
loans and by its higher costs under uncertainty. In this context any new regulation should
explicitly take into account its potential transaction costs and the authorities should
undertake a systematic effort to reduce them. Thirdly, under these conditions it would be
convenient to create the incentives for other potential suppliers participating in the market
(builders, loan and saving societies, cooperatives ). To do so several initiatives have to be
put in place. Among them, information on debtors should be improved, the legal framework
for a long term mortgage market connecting directly household demand with long term
investors should be enacted and the Stock Exchange regulations should be reformed to
include the specific needs of the mortgage credit. In these cases more flexible financial
regulation should be explored in order to allow the participation of new institutions without
wounding the market discipline and without increasing the systemic risk. Lastly, the
normalization of judicial procedures of mortgage credit should urgently be undertaken.
As regards social housing finance, the FO.NA.VI continues to be the most important
program and its functioning is still deficient in spite of recent reforms that de-centralized it
to the Provincial Housing Institutes and speeded up its management. It has been affected
by poor management that resulted in recurrent leakage of subsidies towards high-middle
income households, in high administrative costs and low credit recovery. In this case the
reform proposed here organizes social expenditure in housing in two separate programs:
1. Provision of housing subsidies to replace slums and 2. Provision of housing subsidies
and access to the credit market to targeted households according to the income level.
Each program should work independently and both should include an active role of
households to select the kind of contract they will have to comply with through a combined
scheme of public subsidies and banking credits.
5. Concluding remarks
During the nineties the mortgage market in Argentina experienced a “take off” that was
abruptly interrupted by an exogenous macroeconomic crisis in 2002. Factors favoring this
evolution were: the release of households liquidity constraint that followed the deep
economic and financial reform in early nineties; the use of dollar denominated contracts,
the reorganization of the financial system including foreign banks with long experience in
mortgage contracts in their own countries that used mortgage to attract clients; the
privatization of the National Mortgage Bank and the reform of the National Housing Fund
that partially ceased unfair competition with private financing institutions in serving middle
income households; the modernization of the legal institutions backing the mortgage
contract including securitization procedures. Negative factors during the period were: the
increasing indebtedness of the public sector with the local banks that led to a crowding out
effect and to increasing country risk. These factors affected the development of the whole
financial system but due to its characteristics (lower financial risk and diversification
capacity) the mortgage market was one of the less affected. One negative factor distorting
the distribution of mortgage credit throughout the country (and probably also the total
amount allocated) is the difference in risk and costs stemming from mortgage foreclosure
through the provincial judicial system. The enactment of non-judicial (administrative)
procedures for mortgage foreclosure was a powerful signal to the market that could not be
tested completely before the 2002 crisis.