Government studies using fund to expand access to home ownership

The Jair Bolsonaro government (PL) is preparing a change in the Fundo Garantidor de Habitação Popular to expand the access of low-income families to cheaper lines of credit to purchase their own home.

In addition to simplifying the rules, the fund must also receive a contribution of resources from the FGTS (Fundo de Garantia do Tempo de Serviço) to have greater firepower in granting guarantees. The value is still under discussion within the government.

The proposal should integrate the menu of positive measures that is being prepared by the Ministry of Economy for launch next week. The expectation of Minister Paulo Guedes’ team is to announce one action per day.

The sequence of events is planned at a time when Bolsonaro remains in second place in the polls of voting intentions for the 2022 elections, behind former president Luiz Inácio Lula da Silva (PT).

FGHab was created in 2009, by the same law that launched the Minha Casa, Minha Vida housing program — renamed Casa Verde e Amarela by the current administration. The fund guarantees financing operations contracted by borrowers with a family income of up to R$5,000 per month.

Current coverage includes payment of the outstanding balance in the event of death or permanent disability and recovery expenses in the event of physical damage to the property. The fund also pays property benefits in the event of unemployment or loss of income, but only temporarily: the beneficiary needs to reimburse the fund in the future, in amounts adjusted for interest.

The assessment within the government is that the current design of the FGHab is inefficient, as the loss of income is not always the only reason for family default. In addition, an operation involving the guarantee of the fund takes around 80 days to complete — almost triple the time taken to analyze a financing by Casa Verde e Amarela.

The idea under study, according to government technicians, is to simplify the rules of the FGHab and allow it to enter as a guarantee for general cases of default. The economic team hopes that the change, although subtle, will help leverage loans for low-income families to buy their own home.

With the easier activation of guarantees, the assessment is that banks will have greater appetite in offering credit lines to this public. The costs involved may also decrease.

To make the changes viable, the government must also make a contribution of resources to the FGHab, which today has a net worth of R$ 2.8 billion. The value is considered shy for the intended range size.

The amount of the contribution is under discussion, but, according to government officials, it can be made with resources that currently make up the FGTS. By resorting to workers’ money, the government avoids impact on its own accounts. One of the purposes of the FGTS is to finance home ownership.

FGHab was used as collateral in more than 1.9 million loan contracts signed through Caixa and Banco do Brasil (up to September, most recent data available). The contracted amount exceeded R$ 150 billion, which represents an average of R$ 74 thousand per family.

The government has been studying credit-related measures to move the economy using the experience considered successful from the programs created during the pandemic, which lent R$63 billion to more than 850,000 companies.

With no money in the budget, Guedes’ team has focused its firepower on proposals that use funds resources to leverage credit, minimizing impacts on public accounts while seeking a positive agenda for the government.

Guedes has already announced in conversations with the business sector that the package to be announced will allow the contracting of R$ 100 billion in new loans.

One of the measures is the granting of financing to individual micro-entrepreneurs, micro, small and medium-sized companies through Pronampe (National Support Program for Micro and Small Businesses) and PEAC (Emergency Program for Access to Credit), two programs launched at the height of the crisis caused by Covid-19.

The government will allow the maintenance of resources invested in the guarantee funds of these programs until the end of 2023, which makes new operations possible without the need for the National Treasury to inject more money. Today, Pronampe is already permanent, but it is paralyzed by the exhaustion of available resources. The PEAC was closed at the end of 2020.

The package must still be reinforced by Fampe (Aval Fund for Micro and Small Enterprises), which will receive a contribution of around R$ 600 million from Sebrae.

Another proposal under discussion is the use of a microcredit guarantee fund to boost small loans for entrepreneurs and informal workers. The idea is to use between R$3 billion and R$3.5 billion from the FGTS to contribute to a fund for this purpose.

For workers, one of the most awaited measures is the release of a new round of FGTS withdrawals. as anticipated the sheet, around 40 million workers will be able to withdraw up to R$ 1 thousand from their accounts. The initiative should inject up to R$ 30 billion into the economy.

The government is also expected to announce a measure aimed at facilitating foreign trade. The Economy plans to allow the country’s current dry port companies (export and import terminals away from the sea) to gain a license for at least another 25 years to continue operating.

Several of the more than 60 units in existence today are expired or about to expire. Today, the law requires that these terminals go through a bidding process again.

As shown by sheet, the same type of measure was taken during the Dilma government (PT) and was even investigated on suspicion of having been ordered by a company. According to government officials, however, the initiative will not favor current companies because new companies interested in dry ports would gain ample flexibility to invest.