LTV No-Wind Zone Financial Public Enterprise Mortgage Loans... Welfare or Privilege?

Controversy Over Preferential Treatment in Housing Welfare Programs for Employees of Financial Public Enterprises

On the 5th, from the observation deck of Lotte World Tower in Songpa-gu, Seoul, where apartment prices and jeonse prices continue to rise without turning downward, apartments in Songpa-gu are being observed. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Park Sun-mi] Ahead of the national audit (Gukgam) targeting financial public enterprises scheduled for the 16th and 20th, controversy has erupted over preferential treatment related to employees' housing welfare programs.

According to the financial sector on the 13th, employees of major financial public enterprises are exempt from the Loan-to-Value (LTV) ratio regulations, which limit loan amounts, under the name of in-house welfare. This contrasts with the general public, who face LTV restrictions of 20-50% in real estate regulation areas called 'adjustment target areas' when obtaining mortgage loans from banks due to government real estate market regulations.

Korea Asset Management Corporation (KAMCO) supports guaranteed loans exempt from LTV regulations for employees without homes who have worked for more than two years. In Seoul, the metropolitan area, and Busan, loans up to 160 million KRW are supported regardless of whether the area is a real estate regulation zone. For metropolitan cities and Changwon, the limit is set at 135 million KRW, and for other regions, 120 million KRW. Because LTV regulations do not apply, additional loans are possible through in-house welfare programs after obtaining loans from banks. However, loans are not available for high-priced homes exceeding 900 million KRW in transaction value, and repayment must be made with equal principal installments over 20 years after a 4-year grace period.

Credit Guarantee Fund allows loans up to 70% of the LTV limit regardless of real estate regulation zones. Loans are available up to 130 million KRW per person. Korea Housing Finance Corporation also provides loans up to 70% LTV with a maximum limit of 130 million KRW. After receiving a mortgage loan from banks, additional overlapping mortgage loans operated within the corporation are permitted.

Deposit Insurance Corporation does not impose LTV restrictions in its in-house housing loan program but prohibits mortgage loans for homes exceeding 900 million KRW or for homeowners. There is also an obligation to repay 10% of the loan principal and interest annually. The maximum loan amount available is 80 million KRW. Reflecting the soaring housing prices, the loan limit was raised from 50 million KRW to 80 million KRW last August. Overlapping loans with bank mortgages are also allowed.

Political Circle: "Preferential Treatment for Public Enterprises Must Be Improved"
Financial Public Institutions: "Not Preferential Treatment but Employee Welfare"

In the political arena, it is argued that although real estate regulations such as LTV have been significantly strengthened, public institutions enjoy 'preferential treatment' that ordinary people can only dream of through solid in-house loan systems.

Kang Min-guk, a member of the National Assembly's Political Affairs Committee from the People Power Party, pointed out that public institutions are evading LTV regulations through in-house loans, stating, "Employees receive loans up to 70% of the LTV limit regardless of regulation zones through in-house loans. Because they can receive overlapping in-house loans in addition to bank loans, a 'regulation-free zone' is created, which is unfair."

Jeong Seong-ho, a member of the Planning and Finance Committee from the Democratic Party of Korea, also voiced, "If public institution in-house loans are perceived as preferential treatment contrary to public sentiment and government policy, they should be improved to a socially acceptable level."

On the other hand, public enterprises claim there is no preferential treatment regarding housing loans as pointed out by the political circle. Even if LTV regulations do not apply, there is a maximum loan limit, and interest rates are often higher than those of banks, so the use of in-house welfare programs has sharply declined since the government's real estate regulations were implemented.

An official from a financial public enterprise said, "For houses under 85㎡, an interest rate of 3.3% per annum is applied, and for houses over 85㎡, 6.7% is applied. Even if additional loans beyond bank loans are possible, the actual number of people using this program this year is in the single digits," drawing a clear line.

Another employee of a financial public enterprise said, "Although overlapping loans are possible, if you use in-house welfare to get a lower interest rate than the market rate, you have to pay taxes on the benefit, so it is not actually advantageous. It should be seen as in-house welfare support for those who really need it, not preferential treatment," he argued.

This content was produced with the assistance of AI translation services.