House approves bill allowing Brazilians to levy real estate

The House of Representatives passed a bill on June 1 that allows Brazilians to levy their homes, using it as a guarantee for different loans. The bill will now move forward to the Senate.

One of the main changes proposed by the House is the possibility of using a family home as collateral in one or more loans, even if the loan was taken out by a third party — for instance, a father levying a house to vouch for a loan taken out by a child.

As things stand, Brazilian legislation states that a family cannot lose their home if they default on a loan, except in the case of a mortgage. The Economy Ministry believes the measure will increase credit availability in the country and reduce costs. The opposition, however, notes that families may be in danger of losing their only property should they default on loans for whatever reason.

Besides real estate properties, the bill also allows citizens to levy mining rights as warranties, although it maintains a ban on granting rural properties as guarantees in agricultural loans.

Another noteworthy change proposed by the bill is exempting foreign investors from paying tax on the income obtained from corporate bonds, receivables investment funds (FIDC) — except if the receivables come from financial institutions — and long-term bonds issued by banks, known as Letras Financeiras (LFs). The measure is an attempt to foster their appetite for corporate bonds in Brazil.