Presentation of SGFGAS

version française

SGFGAS (Société de Gestion des Financements et de la Garantie de l’Accession Sociale à la propriété) provides services to banks which distribute special property mortgages available in France, and issued or underwritten on behalf of the state. Specifically, these are  Zero-interest Loans ("PTZ"), Zero-interest Eco-loans ("Eco-PTZ") and Affordable Housing Loans  ("PAS"). In parallel, SGFGAS monitors and manages these loans for the State.

SGFGAS provides the same services for the management of Home Savings Accounts ("CEL") and Home Savings Plans ("PEL").

Through its governance mode, combining bank and State representatives, SGFGAS acts as a forum for exchange and dialogue.

1. History

SGFGAS was established in 1993, subsequent upon various projects commissioned by the public authorities concerning access to property mortgages for households on low-to-mid incomes. The last 5 years of the 80s had been marked in Europe, after the USA, by a vast wave of deregulation and simplification of banking circuits, of which the consequences were:

• the end of the "partitioning" of financial circuits and specific financial channels, institutions and products used by the State of France up to that time to offer mortgages to low-income households. Specifically, this was to lead, in 1995, to the end of the "PAP" program (i.e., the initial version of the Affordable Housing Loan which later evolved into the "PAS" program);
  
  
• at the same time, a new interest amongst retail banks for their private customers, whose profitability was set to rise and who now seemed more stable than companies, given that the latter now had direct access to capital markets.

Given these developments, the French public powers considered that they should work in liaison with banks to ensure that low-to-mid income private customers would not be excluded as a result of an overly selective credit policy being applied by some banks.

Hence the idea arose:

• to facilitate access to mortgages for these households, by offering attractive financial conditions,
  
  
• to improve knowledge of the risk which this category of borrowers poses,

doing so by way of a specific institution, bringing together the State and credit institutions.

This led to SGFGAS ("Société de Gestion du Fonds de Garantie de l'Accession Sociale à la propriété") being established in 1993, for the purpose of guaranteeing, on behalf of the State and banks, the original "PAS" (Affordable Housing Loan). These PAS mortgages were guaranteed by the French State in the event of the borrower defaulting, and this guarantee itself was underwritten via a fund (which gave SGFGAS its name) plenished by the banks and the State, and managed by SGFGAS. In a nutshell, SGFGAS's initial mission was to manage the PAS program, indemnify lending banks in the event of a payment default, verify loan applications, and collect information about applicants. However, this initial mission was very soon enriched and expanded.

As from 1995, SGFGAS's mission was extended to include zero-interest loans ("PTZ"): when this new residential property purchasing program was established, SGFGAS acted as the interface between the State and the lending institutions, calculating and paying to the institutions, on behalf of the State, the interest payments they had foregone by approving a PTZ loan. This mission was maintained as the PTZ program evolved: transformation of the "lost-interest" subsidy into a tax credit granted to institutions (New 0% PTZ from February 2005, introduction of the PTZ+ as of 1 January 2011, itself modified several times, most recently at the end of 2014. Since 1 January 2015, the PTZ+ has gone back to its original name of PTZ. This loan is intended to help persons buying new properties or social housing where the buyers are the occupants or existing properties requiring renovation work in selected villages and small towns. Applicants for the latest version of the PTZ are means tested.

In April 2009, SGFGAS extended its missions to include the 0% Eco Loan, intended to finance renovation work to enhance the energy performance of an existing property. Focused initially on private individuals, the Eco Loan was extended at the beginning of 2015 to include residential blocks with several owners (condominiums, etc.) whereby the owners syndicate takes out one single Eco Loan for large-scale projects.

Since 1 January 2014, SGFGAS has also been involved in managing Home Savings Accounts and Home Savings Plans (without however paying the Government Top-Up to savers).

Concerning guaranteed loans, the main change (end 2005) was to replace the fund (remaining cash taken back by the State) with a direct guarantee given by the public authorities. The regime resulting from this change was baptized the "new FGAS".

Because of these successive evolutions, SGFGAS changed its name in January 2015, and its full name is now the "Société de Gestion des Financements et de la Garantie de l'Accession Sociale à la propriété".

2. The SGFGAS organisation

The governance of the SGFGAS was devised to get both the State as well as the banks involved in operating the body and in defining the products for which the body is responsible.

   Legal structure of a business company

SGFGAS is organized as a business company (of type "société anonyme"), and credit institutions taking part in the various property-purchase programs must hold shares in SGFGAS. Although the State owns none of its capital, it nevertheless plays an essential role in that it has two Government representatives (one from the Treasury and one from the Ministry for Housing, and they can veto any decisions relating to SGFGAS's financial activities.

SGFGAS is comprised of 8 companies or shareholder groupings. The French bank Solféa which joined in 2013, is the most recents hareholder.

In addition to the Chairman, the SGFGAS Board of Directors consists of 10 Directors. Since 9 February 2010, when Banque Postale joined, the Board has 5 members representing commercial banks (BNP Paribas, LCL, Société Générale, Crédit Foncier de France, La Banque Postale), and 4 members representing cooperate¹ banks (Banques Populaires & Caisses d'Epargne (BPCE), Crédit Agricole, Crédit Immobilier, Crédit Mutuel). In its capacity as a founder member, the National Federation of Crédit Agricole also has a seat.

Mr François Delarue was appointed as new Chairman of the Board on 29 November 2013, following prior consultation with the Board of Directors in November 2013. The same Board meeting decided to renew the tenure of the Managing Director, Mr François de Ricolfis.

Apart from Board meetings, SGFGAS organizes, at least every quarter, themed consultation meetings (technical committees) with the lending establishments, where each type of special mortgage is discussed.

  A framework of contractual relationships

The State defines the principles of the programs entrusted to SGFGAS, doing mainly so by means of legal text incorporated to the French Building and Housing Code. This led to SGFGAS being appointed by the State of France to manage the FGAS program in all its successive forms, and in particular to compensate lenders according to default declarations made by them (see "Guarantee System" for more details). Likewise, various legal texts (see below) have been enacted to entrust SGFGAS with its missions relative to the PTZ and the Home Savings program.

The exact implementation is specified by means of agreements defining the respective roles and responsibilities of the State, SGFGAS and the lending institutions in the distribution of these special mortgages. Such agreements have been signed for Affordable Housing loans, Zero-Interest Loans and Eco-loans, as well as the Home Savings program. The purpose of this system is to get the banks involved with the implementation and evolution of procedures.

  A highly automated operation

The functioning of SGFGAS is based on automating information exchanges with the lenders. Specifically, the latter upload an "information file" with details for each eligible mortgage. SGFGAS makes an initial examination of the information so transmitted, following which the loan applications can be set for processing. SGFGAS also has a team of inspectors empowered to carry out after-the-fact checks, from their office on the basis of documents, or by physically calling out, in order to verify the conformity of the declared data with the documents presented in the mortgage dossier.

At the appropriate time, SGFGAS will either pay the lending institution the necessary sum to cover a default (for a guaranteed mortgage) or pay them the subsidy to which they are entitled (1995 to 2005 for 0% mortgages) or confirm their Tax Credit entitlement (a form which, since February 2005, covers government assistance accompanying the 0% Mortgage). Thanks to a high level of IT integration, SGFGAS is able to cope with a constant increase in the number of incoming applications without increasing costs nor the workforce (constant at about 30 staff).

  The main legal texts

The founding texts are the Finances Bill of 30 December 1992 (article 126); the Finances bill of 30 December 2005 (article 94) and the amended Finances Bill of 30 December 2006 (article 143) which provided for the granting of the State guarantee as part of the FGAS, as well as the entrusting of the management of this guarantee to a company in which the lending institutions would be shareholders, and whose bylaws would be approved by decree, and whose chairman (of the board of directors) would be appointed by official order: SGFGAS.

The 0% mortgage ("PTZ") was established by a regulation (decree) of 29 September 1995, was subsequently amended on several occasions, and then inserted via articles R 317-1 and following in the Building and Housing Code (CCH).

The New 0% mortgage ("NPTZ") was established by the 2005 Finances Bill of 30 December 2004, was appended by a decree issued 31 January 2005 which was formalized via articles R 318-1 and following of the Building and Housing Code.

The PTZ+ (a revamped version of the standard PTZ mortgage) was established by the 2011 Finances Bill, was modified on a number of occasions, most recently in October 2014 and on 1 January 2015, and is formalized by articles L 31-10-5 and R 31-10-1 and following of the Building and Housing Code.

Lastly, the 0% Eco Loan, created by the 2009 Finances Bill, and appended by decrees (the first of which were issued on 30 March 2009) is formalized by articles R 319-1 and following of the Building and Housing Code. The collective 0% Eco Loan (aimed at jointly owned properties such as condominiums) arose from article 103 of the law n° 2012-387 of 22 March 2012 relative to the simplification of the law and the reduction in the number of administrative procedures (the "Warsmann" law).

The initial Finances Bill for 2013 entrusted SGFGAS with the monitoring and verification of Home Savings Plans and Home Savings Accounts (article L 315-5-1 of the Building and Housing Code).

3. The missions 

Guaranteeing Affordable Housing Loans

The original mission: guaranteeing mortgages for the social access to homeownership

 The Affordable Housing Loans Program ("PAS")

The first mission entrusted to the SGFGAS was in relation to the PAS program. Set up by official decree on 18 March 1993, Affordable Housing Loans are officially approved mortgages (i.e., a loan with a regulated interest rate, granted by financial institutions having signed an agreement with the State) which correspond to all of the eligibility criteria for this category of mortgage, but which also have the following special characteristics:

Means testing of households : PAS mortgages are reserved for households with lower incomes but which are sufficiently solvent (as assessed by the lender bank) to buy a property under optimal conditions.

A maximum family-income ceiling has been fixed. This ceiling varies according to composition of the household and the location of the property and applicants must respect these criteria.

All officially approved mortgages granted as of 20 June 1993 to a borrower respecting the income ceiling must be guaranteed by the FGAS.

A maximum rate of interest: given that one of the aims of the FGAS is to guarantee, under satisfactory conditions, access to mortgages for borrowers on lower incomes, the nominal interest rate of a PAS must comply with a specific proportional ceiling, equal to that of officially approved mortgages minus 0.6%. This maximum rate is indexed to the TME (average monthly rate of State mortgages for a duration equal to or exceeding 7 years).

A first-rank lien must be taken out by the lender once the value of the PAS loan exceeds €15,000. The cost of this security is less than for market loans, and administrative charges are also capped.

Approximately 60,000 new and existing properties are financed by the PAS program each year (approximately 65,000 in 2014).

Initially restricted to mainland France, the FGAS was extended by a decree on 27 April 1995 to officially approved mortgages granted in the DOM (French overseas territories) - called PAS-DOM - by the member credit institutions.

Their characteristics are similar to those of a standard PAS: as for a PAS, a maximum family income ceiling has been fixed, but this one is specific.

Since 2003 (official order of 25 August 2003), PAS-DOM mortgages are the only officially approved mortgages in French overseas territories.

Apart from updates to the resources ceiling, the PAS program has undergone few changes since first created. It is intended to fund the purchasing of the applicant's main residence, with or without renovation work, and can be used for new or existing properties. A PAS loan can also be used to fund only renovation work.

 Guaranteed 0% mortgages :

When the French Housing Ministry launched the 0% mortgage (“PTZ”), it was agreed that if such mortgages were granted to households whose incomes respected the existing PAS scale, then they too could benefit from a FGAS guarantee. In any case, this guarantee is compulsory whenever a given credit institution approves a 0% mortgage as well as a PAS mortgage for a given applicant.

Approximately 20,000 of these loans were issued in 2014.

The different 0% loans

 The first 0% loans (from 1995 to 2005)

The 0% loan ("PTZ") was set up in 1995. This loan, whose applicants were means tested, was used to finance part of the purchasing cost of a new property, or alternatively, of an existing property requiring significant renovation work (initially corresponding to 35% of the transaction amount, subsequently reduced to 25%). The actual loan amount depended on the location of the property in France, which was divided into a number of zones (A, B, C). The loan repayment schedule also varied according to the income of the borrowers, and borrowers at the lower end of the income scale were entitled to deferred repayment. The banks were in charge of distributing the PTZ, and they received a subsidy from the state to make up for the interest payments foregone by the bank in agreeing to distribute the PTZ. By a decree passed on 29 September 1995, the state entrusted SGFGAS with a new responsibility,that is, paying, on behalf of the state, the aforementioned subsidy to the lending institutions.

This appointment was institutionalized by an agreement signed with the State on 5 December 1995.,Ffurther agreements were made with each of the credit institutions that wanted to distribute 0% mortgages, and that had made a prior agreement with the StateAs opposed to the FGAS, there is no link between signing an agreement with SGFGAS to distribute 0% mortgages and the obligation to become an SGFGAS shareholder.

Setting up the 0% mortgage did have two major consequences for the FGAS. Firstly, it showed that the financing of affordable housing loans had become generalized: the PAP program ("prêt aidés à la propriété") was shelved, and the PAS became the main mortgage taken out by lower-income borrowers when buying new housing, whereas previously, PAS mortgages were used mainly to facilitate the purchasing of existing properties. Secondly, the scope of coverage of the FGAS guarantee, as defined in article R. 312-3.1 of the French Building and Housing Code, was extended to cover those 0% mortgages which respected the same income ceiling as for PAS mortgages.

Thus, the PTZ rounded off the reform relative to the financing of affordable housing, a reform initially launched at the beginning of the 90s. The PTZ also led to a strong increase in the activities of the FGAS; indeed, from 40,000 loans guaranteed each year (official figure for the PAS program in 1984), production increased over threefold to up to 125,000 guaranteed mortgages in 1999, including 74,000 PAS mortgages and 51,000 PTZ mortgages. There were 125,000 PTZ mortgages issued in 1999, guaranteed or non-guaranteed, but this dropped to 79,000 in 2004.

  The "New 0% Loan" (2005 to 2010)

The New 0% Loan (NPTZ) set up in 2005 differed from the previous 0% Loan program in 2 ways. Firstly, the banks now received a tax credit to offset the interest they had foregone (i.e. they no longer received a direct cash subsidy) and secondly, the NPTZ could be used to finance the purchase of new as well as existing properties, even without carrying out renovation work. In application of law no. 2004-1484 of 30 December 2004 (subsequently amended) (law no. 2009-1673 of 30 December 2009) implementing the 2005 Finances Bill, and in particular articles 244 quater J, 199 ter I and 220 K, General Tax Code (CGI), SGFGAS was appointed to manage the New 0 % Mortgage program ("NPTZ").

Apart from these two changes, the NPTZ criteria were the same as for the initial PTZ: first-time buyers only; means tested; partial financing only.

The State mandated SGFGAS to determine the calculation basis for the amount of tax credit allocated to loans granted by credit institutions under the terms fixed by articles R.318-14 and R.318-16 of the Building and Housing Code, and to send the results of this calculation to both the credit institution and the tax authorities.

As with the PTZ, SGFGAS signed an agreement with the Stat. Aagreements were also entered with each of the credit institutions that wanted to distribute new 0% mortgages, and that had made a prior agreement to do so with the State.

The FGAS guarantee, as defined in article R. 312-3-1 of the Building and Housing Code, was extended to cover those new 0% mortgages which respected the same income ceiling as for a PAS.

The program was officially launched on 1 February 2005, and the first years of the program saw program take-up more than doubling despite the continued upward spiral of house prices, in principle unfavorable to affordable housing transactions: a total of 216,000 NPTZ mortgages were approved for 2009, and 296,000 were approved for 2010. Lastly, in a sure sign of the program's importance to France's affordable housing policy, the NPTZ was part of the French Economic Stimulus Plan set up in the closing months of 2008 in response to the global financial crisis which had started just a few months earlier: the fundable amount was doubled for new builds.

  The PTZ+ (revamped PTZ)

On 1 January 2011, the "PTZ+" mortgage was launched. Created by the 2011 Finances Bill, the PTZ+ replaced 3 former programs: the NPTZ, Pass-Foncier and the tax credit on loan interest payments. The mortgage amounts and durations of the PTZ+ are greater than previous similar programs. However, it is still reserved for first-time buyers, but applicants are not means tested.

The potential mortgage amount was significantly increased to better reflect actual property prices in a given region, especially in the so-called "A" regions (including Paris) where demand outstrips supply. Lastly, environmental awareness was encouraged by linking the maximum mortgage amount to the property's energy performance rating.

The revamped PTZ fared well, helped along by a relative recovery in the property market, and financed 349,000 transactions in 2011.

However, the initial 2012 Finances Bill enacted a significant modification to the PTZ+ in order to reduce the cost of this program for the public finances: as of 1 January 2012, its scope was restricted to sales of new properties (and to sales of HLM social housing) and it was decided that, as used to be the case until 2010, applicants should be means tested. The eligible transaction amounts remained unchanged (refer to the PTZ Loan section for more details).

As of 2013, the PTZ+ for new builds was aligned with construction standards and was therefore reserved for properties with a good energy performance (the BBC standardfrom the 2012 Thermal Regulation). As an exceptional measure, the Finances Bill Amendment of 16 August 2012 stipulated that options exercised on "PSLA" social-housing loans approved prior to 1 January 2012 are also eligible for the program. Lastly, an additional feature of the re-modeled PTZ+ program was the re-introduction of fully deferred payments for the 2 categories of applicants with the lowest income levels, as well as a further reduction of the resources ceiling of the applicants in order to limit the budgetary provision to its level as of 2012.

These measures, combined with a subdued property market in France, led to a significant drop in the number of PTZ+ loans (fewer than 50,000 loans taken up in 2013).

At the end of 2014, and in the light of the lasting sluggishness of the French property market, a number of modifications were made to the PTZ+: the eligible transaction amounts were reviewed; the repayment schedules were changed; the zonal division was significantly modified.

As of 1 January 2015, the PTZ+ can be used to finance transactions involving existing properties requiring renovation work, subject to said property being located in municipalities with a population of less than 10,000 inhabitants.

  The 0% Eco-loan

Pursuant to the 2009 Finance Bill no. 2008-1425 of 27 December 2008, as amended by the 2009 Finance Amendment Act, in particular Articles 244 quater U, 199 ter S and 220 Z of the General Tax Code, SGFGAS was appointed to manage the interest-free Eco Loan program. This loan, of up to €30,000, is available for energy efficiency improvements to properties built before 1990. The originality of this program is that it is used to finance either a "package" of renovation works chosen from a predetermined list, alternatively, it can be used to finance an overall improvement of the energy performance of a property.

The State has mandated SGFGAS to calculate the amount of tax credit on mortgages granted by credit institutions pursuant to the conditions specified in articles R.319-11 and R.319-12 of the French Building and Housing Code, and to send the resulting calculation to credit institutions and the tax authorities.

SGFGAS has signed an agreement for this purpose with the State. New agreements have also been signed with each credit institution willing to offer the 0% Eco Loan and which has previously signed an affiliation agreement for the system with the State.

The scope of the New FGAS guarantee, defined in Article R. 312-3-1 of the Building and Housing Code has itself been extended to 0% Eco Loans subject to the same income ceiling as that of PAS mortgages. The 0% Eco Loan may be combined with a NPTZ mortgage in order to buy and improve an existing property.

The 0% Eco-loan differs, both in terms of its purpose and conditions of eligibility, from similar programs managed previously by SGFGAS. Its purpose is different in that it helps to finance energy conservation improvements to existing properties - expensive renovations which enable reduction in energy consumption and greenhouse gas emissions, and encourage the use of renewable energy sources. It is also different in that its beneficiaries are not means tested, and can be private individuals or partnerships (SCIs (, on-trading property partnerships).

The property concerned must be used as a main residence by its owner, tenant or rent-free occupier.

In 2015, the Eco Loan was extended to apartment blocks (condominiums, coops.). This was the consequence of article 103 of the law n° 2012-387 of 22 March 2012 relative to the simplification of the law and the reduction in the number of administrative procedures (the "Warsmann" law) defining a framework to facilitate loans taken out by Residents Associations for their building(s). The collective Eco Loan enables joint properties "copropriétés) to finance renovation projects for complete apartment blocks (roof insulation, collective heating, etc.). Individual owners can, if they wish, combine this collective 0% Eco Loan with an individual Eco Loan.

Banks interested in distributing this innovative loan signed a specific agreement with the State of France and with SGFGAS, for the purpose of amending the initial Eco Loan.

Approximately 36,000 Eco Loans are distributed each year.

Home Savings Program

Established in 1965, the Home Savings Program ("épargne-logement") consists in 2 phases.

The first phase consists in a individual making deposits into either a Home Savings Account ("compte épargne-logement") or a Home Savings Plan ("plan épargne-logement"). With a Home Savings Account, partial withdrawals are authorized whereas, with the Home Savings Plan, the deposited funds are blocked in exchange for the Plan holder being able to deposit more into the program. The rate of interest generated is set when the Home Savings Account/Home Savings Plan are first opened. Both of the Home Savings options are available from all banks.

Once the first phase (i.e., during which money is saved) is completed, the holder of the account can take out a property loan. The rate of interest of this loan depends on the rate of interest paid on the funds saved during the first phase, and the size of the loan depends on the "loan entitlements" accrued by the saver during the first phase. These "loan entitlements" depend in turn on the interest generated during the first phase. Subject to respecting these conditions (which evolved over time for both Home Savings Accounts and Home Savings Plans), the Government pays a special Top-Up ("prime") amount to the borrower.

Since 1 January 2014, SGFGAS has been entrusted with three missions in relation to the Home Savings Program: collect statistics relative to program participants; provide legal and technical support to lending establishments; carry out audits in lending establishments. The payment of the special Top-Up amount is entrusted to another institution (currently the French bank Crédit Foncier de France).

The Home Savings Program is very popular, notably because the interest rate of the Home Savings Plan is very attractive; as of 30 September 2014, there were 9,040,297 Home Savings Accounts and 13,861,831 Home Savings Plans active.

Other missions of the SGFGAS 

   Making PAS mortgages secure

PAS mortgage holders can make their mortgages more secure by signing up to the Compulsory Housing Contribution program (called "Action Logement").

From 1 April 1999 to 31 December 2003, any household taking out a mortgage guaranteed by the FGAS, was entitled to sign up to the "Action Logement" scheme. Then, if the borrower or one of the co-borrowers became unemployed, they were entitled to have their monthly repayments reduced by 50%. The remaining 50% is repaid by the same borrower, without interest nor penalties, after the main mortgage had been paid off. If this scheme was called to perform during the first eight years of the mortgage, the borrower was entitled to this 50% reduction for twelve months, to which another 12 months were added if the scheme was called to perform after the ninth year of the mortgage.

The aim of the scheme was to protect households which were sensitive to changes in the job market by immediately covering some of their repayments in the case of unemployment, and thus encourage them to purchase a property and find a new job as soon as possible.

SGFGAS is responsible for paying the banks the sums covering the interest costs for postponing the installments, as well as checking that the program requirements were respected.

  Checking officially approved mortgages

The decree of 27 July 2000 entrusted SGFGAS, instead of Crédit Foncier de France, with the task of inspecting and managing officially approved mortgages ("prets conventionnés") on behalf of the State.

Officially approved mortgages must conform to a standard agreement approved by the State. The PAS is a particular category of officially approved mortgage, granted after a means test. SGFGAS checks their compliance with all legislation concerning officially approved mortgages, publishes the reference rate applicable to these mortgages, and collects statistical information about the distribution of these mortgages by affiliated credit institutions.

   Helping local authorities participate in home ownership schemes 

Since issuance of law no. 2004-809 of 13 August 2004 concerning local authority rights and responsibilities, local authorities wishing to establish home ownership schemes based on the 0% Mortgage system may use SGFGAS services (e.g., Prêt Paris Logement or Prêt Logement 92, designed respectively for the City of Paris and the Hauts de Seine County Council).

The following is a non-exhaustive list of SGFGAS missions :

1. provide initial assistance to devise the program, and assess the program following implementation;
2. prepare public assistance scales;
3. provide online assistance to answer questions from participating lenders;
4. perform follow-up monitoring to enable local authorities to ensure compliance of distributor institution practices with the provisions of agreements signed with the local authorities.

SGFGAS also has expertise in IT services for all purpose public assistance distribution, using a bank loan vector.
 

4. SGFGAS Organisation Chart

1- known in France as "banques mutualistes"