Over time, the range of schemes managed by SGFGAS has expanded. All aim to facilitate home ownership or renovation, and SGFGAS acts by providing services to banks (calculation and payment of State aid, legal and technical assistance) and to the State (information, statistics, controls).
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 SGFGAS was in relation to the PAS program. Set up by a regulation (decree) on 18 March 1993, Affordable Housing Loans are officially approved mortgages (“prets conventionnés", i.e., a loan with a regulated interest rate, granted by lenders 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 low income households low but which are sufficiently solvent (as assessed by the lender) 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. Since 2014, the ceilings are the same for PAS and for zero interest loans.
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 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 (no stamp duty), and the lenders administrative fees are also capped.
Initially restricted to mainland France, the PAS was extended by a decree on 27 April 1995 to officially approved mortgages granted in the DOM (French overseas territories) - called PAS-DOM.
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 regular 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.
Lenders extending PAS benefit from a state guarantee in case the borrower is unable to service the loan. The guarantee covers the lenders for 50 % of loss incurred in case of loan restructuring or after repossession.
Approximately 60,000 to 70,000 new and existing properties are financed by the PAS program each year (73,000 in 2015). Total exposure is 53 B €.
Guaranteed 0% Loans :
When the French Housing Ministry launched the 0% mortgage (“PTZ”, zero interest loan), 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 are issued each year.
The different 0% loans schemes
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. Further agreements were made with each of the credit institutions that wanted to distribute 0% mortgages, and that had made a prior agreement with the State. As 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.
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. Agreements 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.
The PTZ+ (revamped PTZ)
On 1 January 2011, the "PTZ+" mortgage was launched. Created by the 2011 Finances Bill, the PTZ+ was part of a streamlining plan, substituting 3 former programs: the NPTZ, the Pass-Foncier (a two-step acquisition scheme, for land and later for the building and the tax credit on loan interest payments. The mortgage amounts and durations of the PTZ+ were greater than previous similar programs. It was still reserved for first-time buyers, but applicants were 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).
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 standard from 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 ("Epargne-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 31 March 2016, there were 8,470,643 Home Savings Accounts and 16,505,922 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 :
- provide initial assistance to devise the program, and assess the program following implementation;
- prepare public assistance scales;
- provide online assistance to answer questions from participating lenders;
- 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.
The SGFGAS participates in World Bank project for setting up or changing housing finance schemes in emerging countries –Egypt, Morocco…).