Law 14.711/2023, the Legal Framework for Guarantees, was recently sanctioned by the Presidency of the Republic. This legislation improves loan rules and establishes a new system for the use of assets pledged as collateral.
Among the main measures introduced by the new Legal Framework for Guarantees, it is important to highlight the following:
- The possibility of the same property being used as collateral in more than one loan application;
- The provision that an electronic summons is now sufficient for debt enforcement to begin;
- The creation of a guarantee agent, to be appointed by the creditors, with the aim of registering the lien on the property, managing the assets and enforcing the guarantee;
- The possibility of extrajudicial foreclosure of mortgages – something that was only allowed for fiduciary alienation;
- The extension of the mortgage to guarantee new obligations in favor of the same creditor.
Under the old rule, only one property could be used as collateral for a single loan until it had been completely paid off. As an example, a house with a forced sale value of approximately R$200,000 could be used as collateral for a debt of R$80,000, but could not be assigned to another debt operation until the first had been fully paid off.
With the change, this same property can serve as collateral for both the R$80,000 loan and another, as long as its value does not exceed the remaining R$120,000.
I believe that these rules should encourage a reduction in interest rates on credit operations, leading to a greater number of debts being issued, and should allow for the long-term expansion of the type of loan with property given as collateral in Brazil.
This is the prospect that is also opening up due to the possibility of debt enforcement by financial institutions being initiated through electronic summonses, which will speed up collection and, consequently, increase the chances of the credit being satisfied.
However, it is essential to emphasize that there is no such thing as too much caution, because the tendency is that with a greater number of operations, default will increase, which is already not small. As a result, financial institutions will need to take greater care when analyzing credit.
