The Association


The Association

The Brazilian Association of Real Estate Loans and Savings Companies (Associação Brasileira das Entidades de Crédito Imobiliário e Poupança - Abecip) was set up in the First National Meeting of the Real Estate Loans and Savings Companies.

The Brazilian Association of Real Estate Loans and Savings Companies (Associação Brasileira das Entidades de Crédito Imobiliário e Poupança - Abecip) was set up in the First National Meeting of the Real Estate Loans and Savings Companies. The meeting was held in Sâo Paulo`s Club Nacional, from August 17 to August 19, 1967, and was attended by representatives of 34 companies. The climax of the meeting was the creation of the Association. The pioneers of the real estate finance industry in Brazil - the partners and directors of Real Estate Credit Societies (SCIs) and Savings and Loan Association (APEs) - participated of the meeting, as well as lawyers, developers and realtors.

Just three years before that meeting, a new and wide-ranged housing finance model had been introduced in Brazil - the Housing Finance System (Sistema Financeiro da Habitação (SFH). The SFH and Abecip histories followed a common trajectory. Before the SFH, housing finance depended on scarce budget funds and privileged only few households. Until 1964, there were no monetary correction and real interest rates - which were introduced by the new model - and therefore, no return on the invested capital.

Abecip was set up as a non-profit private organization, to represent the real estate finance industry, gathering the financial institutions of the SFH, the Brazilian System of Savings and Loans (Sistema Brasileiro de Poupança e Empréstimo - SBPE) and, as of 1997, the Real Estate Financing System (Sistema de Financiamento Imobiliário -SFI). This position allowed the Association to carry out its activities on a national scale and on a comprehensive and efficient manner.

The Association was created to participate in the new housing policy and to respond to the challenge of meeting the demand for housing of the emerging middle class and low income population. There was an enormous unexplored market at that time and the Association wanted to be present in its development.

The founders' goal, which is being followed to these days, was to play a key role in structuring the country's real estate finance. This was carried out throughout the over four decades of its existence. The Association's aim is ambitious: to contribute towards molding the institutional architecture of real estate finance, fulfilling the protagonist role in the process.

The initiative was successful. The Association played a key role in the organization of the private real estate financing businesses and in the discussion of the agenda and of the rules required for the comprehensive system to work properly.

Throughout the SFH history, the Association also played a key role as a link between private businesses and the government. This was essential, for example, in the initial stage of the SFH, a complex model created in 1964 by ministers Roberto de Oliveira Campos and Octávio Gouvêa de Bulhões, in the first year of the Castello Branco administration (1964-67). The SFH was a testing ground for monetary correction. Without monetary correction, no long term financing system was able to strive with inflation, the largest anomaly of the Brazilian economy, which was only defeated three decades after the introduction of the SFH, with the Plano Real of 1994.

The SFH was conceived on sound pillars. It was based on a second-line financial institution with regulatory powers, the National Housing Bank (Banco Nacional da Habitação - BNH). The SFH operated through housing cooperatives (Cohab's), savings banks, APEs and SCIs (commercial banks entered this market only during the eighties). And it had mechanisms to prevent temporary disequilibria in the borrowers' economic life, such as a fund to compensate for wage adjustment and monetary correction mismatches (the Fundo de Compensação de Variações Salariais - FCVS).

Up to the mid-seventies, whilst inflation was moderate according to the standards of that time, the SFH registered a successful history. The system was based on a strong BNH, savings banks, SCIs and APEs fund raising structure, based on real estate bills and on savings accounts - the latter being very successful - and a huge institutional advertising campaign. At the same time, a mandatory savings deposit based on workers' wages (the Fundo de Garantia do Tempo de Serviço - FGTS) was introduced to help develop the SFH. Thus a large spectrum housing finance system was made feasible, which up to the end of the seventies had financed 2.5 million homes. Today this number has now reached 8 million.

However, as high inflation resumed in the mid-seventies, the SFH started to face problems. The basic elements of long term prosperity - economic growth, formal employment and social mobility - were missing.
During the eighties, with the exhaustion of the system due to an erratic subsidy policy granted to households that did not need them, the housing finance model had to be radically reformulated. And Abecip played again a key role in this process.

The combination of political pressures with economic populism unsteadied the housing finance model. In an effort to hide its own limitations, the government closed down the BNH in 1986, transferring its regulatory role to the Central Bank.

But this was not enough. The system had to be reformulated first, to separate the market segment - the SBPE - which uses savings deposit funds, from the social system, which depends on subsidies, budget funds and FGTS funds.

To strengthen the regulatory framework, ensure safety to credit operations and foster the secondary market for real estate assets, Abecip promoted hundreds of meetings, seminars, workshops, national and international conferences, to seek, in the international experience, the best solutions to improve the domestic real estate finance model. The period comprising the end of the eighties to the mid-nineties was a period of studies and debates, which counted with the contribution of well-known specialists, like ex-Finance Minister Mário Henrique Simonsen and ex-Central Bank President Gustavo Loyola. As a result of these efforts, the Real Estate Financing System (Sistema de Financiamento Imobiliário - SFI) was created in 1997 by Law 9514 and complemented later by Law 10931. The SFI introduced securitization of real estate receivables and loans in Brazil, created the real estate property trust sale mechanism (alienação fiduciária) and subsequently the separate equity regime (patrimônio de afetação). Meanwhile, a long way was trailed to eliminate past problems of the SFH, such as restoring the equilibrium of the FGTS fund and solving the huge outstanding balance of the FCVS fund. The golden years of real estate finance made a comeback in the 2007/2009 period. The SBPE financing operations reached historical records in 2009 - over 300 thousand loans were granted, with disbursements totaling some BRL 34 billion.

The Association's head office and forum are in the city of São Paulo. The management and the technical and administrative structure of the Association are located on Avenida Brigadeiro Faria Lima, 1485, Torre Norte, 13th floor, Phone number (11) 3286-4855.