Hankook Ilbo data photo
The financial authorities plan to include measures to strengthen regulations on non-housing mortgage loans (non-ownership) such as land in the’Advanced Household Debt Management Plan’ to be announced this month. The intention is to reinforce the regulation of blind spots for loans as some of the Korean Land and Housing Corporation (LH) employees are mobilizing non-maintenance support from mutual financial sectors as a land speculative loan window for some employees.
According to the financial authorities on the 14th, the Financial Services Commission is preparing measures to reinforce the non-ownership regulations to prevent the blind spot for lending. Recently, Chairman Eun Seong-soo said, “I will look into whether regulation is necessary as a problem arises in areas where there is little interest, such as second financial sectors rather than banking sectors, and land rather than housing.”
One of the regulatory measures under consideration by the financial authorities is to reduce the mortgage recognition ratio (LTV). Currently, LTV in mutual financial sectors such as Nonghyup and Suhyup is possible up to 70% according to the administrative guidance of the financial authorities. Compared to the average LTV level of 60% of the banking sector, more loans can be obtained from mutual finance.
A plan to strengthen the total debt principal repayment ratio (DSR) is also discussed. Currently, 40% of the average DSR for all loans is applied to commercial banks, but 160% is applied to mutual financial sectors. Since each financial institution only needs to fit the average DSR within the regulatory rate, it has been cited as a blind spot that some borrowers can receive loans at a higher rate.
In fact, the scale of non-mainstreaming in the mutual financial sector is showing a steep rise, increasing by more than 30 trillion won last year. According to the data provided by the Financial Supervisory Service to the Office of the People’s Power, Chang-Hyun Yoon, the balance of non-housing real estate mortgage loans at the end of last year was 257 trillion won at the end of last year, an increase of 30 trillion won in one year.
However, as farmers and fishermen with relatively unstable incomes occupy many of the targets of non-responsibility in the mutual financial sector, it is likely that tweezers regulation will be focused rather than large-scale trimming. This is because the new regulations can raise the threshold of loans by preventing loans from living funds rather than speculative loans.
An official from the financial authorities said, “Even if it wasn’t because of the LH outbreak, we have been reviewing the field of household loans such as non-residents for a long time.”
Jeonghyun Kim reporter [email protected]
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