In October, the Federal Government promulgated Law 14.711/2023, which implies significant impacts on the contracting of real estate guarantees within the national territory.

The law, known as the “Legal Framework of Guarantees,” is part of a broader context proposed by the Federal Government to simplify, streamline, and secure the granting of credit with guarantees, under the program “More Guarantees Brazil”.

In general, the new legal regulations bring more viability to mortgages, with clearer and more effective rules for the extrajudicial executive procedure. For instance, the debtor’s exoneration from responsibility for the remaining debt balance is now only applied to financing cases for the acquisition or construction of the debtor’s residential property. The same applies to the rule about the amount to be paid for the property in a second public auction and the possibility of the creditor appropriating the property if no bid is offered within the legal parameters.

Some changes are shared between the mortgage and fiduciary transfer institutions, such as the aforementioned debtor’s exoneration, which now functions similarly in both institutions. In addition to this one, there is the creditor’s option to declare other obligations of the titleholder, which are guaranteed by the same property, due in advance.

Among the various measures introduced by the law to facilitate the granting and recovery of credit, one notable feature is the possibility of a single property being fiduciarily transferred as a guarantee for more than one contract, in addition to the simplification and facilitation of the extrajudicial executive procedure, which pertains to notifying the debtor for the cure of default.

Subject to constitutional discussions regarding the flexibility, which will inevitably be brought to the agenda, the extrajudicial executive procedure for real estate guarantees has introduced an innovative and effective alternative to expand credit granting in national territory, given that any attempt to make the procedure even more efficient is of great value.

The consolidation of these regulations, as with any innovative legislation, will depend on extensive doctrinal and precedential analysis. However, at first glance, it is possible to notice a convergence between the institution of fiduciary transfer and other forms of guarantee, such as the mortgage itself, distancing it from a more specific form of contracting that would blend a loan agreement with a promise of real property transfer.

Such change may not be entirely negative, as it is evident that the creation and alteration of these legal institutions have historically always dictated market trends concerning the choice of real estate guarantees. Its effectiveness? Only time will tell.