Monitoring of Installment-to-Income Ratio in UVA Loans

The BCRA has established a monitoring mechanism to identify and address cases of vulnerability affecting mortgage debtors with loans adjusted by units of purchasing power (unidad de valor adquisitivo, UVA) in accordance with Executive Order No.767/20. According to the installment-to-income ratio reported by financial institutions for each type of loan, the installment-to-income ratio for more than 90% of borrowers will be under 35% in July 2022—end of the convergence scheme.

The National Government and the BCRA have adopted different measures aimed at safeguarding debtors’ position within the financial system in line with the policies intended to curb the economic effects of the COVID-19 pandemic. In particular, Executive Orders No.319/20 and 767/20 freeze UVA mortgage loan installments effective from April 2020 to January 2021.

In order to avoid substantial jumps in installments after a long payment freeze period, Executive Order No.767/2020, Section 3, establishes a convergence scheme effective from February 2021 to July 2022.

Moreover, Section 4 creates a mechanism whereby financial institutions are required to deal with the cases in which borrowers’ installment-to-income ratio is over that set out in the convergence scheme. This is to avoid debtors becoming vulnerable to growing debt.

Estimates based on the salary index developed by the National Institute of Statistics and Censuses (Instituto Nacional de Estadísticas y Censos, INDEC) predict that the installment-to-income ratio will be below 35% at the end of the convergence scheme (July 2022). Anyway, the BCRA has established a reporting regime for the monitoring and early alert of risk to which debtors may be exposed.

May 13, 2021.