Unregulated Financial Public Corporation Mortgage LTV... "Privilege VS Welfare" (Comprehensive)

Kamco and Shinbo Set Limits and Operate In-House Housing Loan Welfare
Controversy Over Preferential Treatment in Housing Welfare Programs for Financial Public Enterprise Employees

On the 8th, the view of apartment complexes in Seoul city from the Seoul Sky observatory at Lotte World Tower, where Seoul apartment prices have been rising for 18 consecutive weeks and jeonse prices for 67 consecutive weeks. According to the weekly apartment price trend announced by the Korea Real Estate Agency on that day, as of the 5th, Seoul apartment sale prices rose by 0.01% and jeonse prices by 0.08%, showing only a 0.01 percentage point decrease compared to the previous week's increase. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Park Sun-mi] Ahead of the National Assembly 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 that limit loan amounts under the name of in-house welfare. This contrasts with the general public, who face LTV restrictions of 20-50% when obtaining mortgage loans from banks in real estate regulation areas called 'adjustment target areas' under government real estate market regulations.

What is the current status of housing loan welfare in financial public enterprises?

Korea Asset Management Corporation (KAMCO) supports guaranteed loans separate 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. After obtaining a loan from a bank, additional loans are possible through the in-house welfare program. However, loans are not allowed for high-priced homes exceeding 900 million KRW in transaction value, and repayment must be made in 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 whether the area is a real estate regulation zone. Loans are available up to 130 million KRW per person. Korea Housing Finance Corporation also provides loans up to 70% LTV with a maximum support limit of 130 million KRW. After receiving a mortgage loan from a bank, 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 those who already own homes. 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 mortgage loans are also allowed.

In the political sphere, 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 the reality 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 areas through in-house loans. Since overlapping loans can be obtained in addition to bank loans, this creates a 'regulation-free zone,' which is unfair." Jeong Seong-ho, a member of the Planning and Finance Committee from the Democratic Party, 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."

Political sphere: "Public enterprise preferential treatment must be improved"
Financial public institutions: "Not preferential treatment but employee welfare"

On the other hand, public enterprises claim there is no preferential treatment regarding housing loans as pointed out by the political sphere. Even if separate from LTV regulations, there is a maximum loan limit, and interest rates are often higher than those in 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 stated, "An interest rate of 3.3% per annum is applied for homes under 85㎡, and 6.7% for homes over 85㎡. Loans were executed before the LTV regulation was strengthened this year, and the number of employees using the program is in single digits," drawing a clear line. Another employee from a financial public enterprise said, "Although overlapping loans are possible, if a lower interest rate than the market rate is applied through in-house welfare, taxes must be paid 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."

Meanwhile, as it becomes difficult for the general public to raise funds for home purchases due to strengthened mortgage loan regulations, there is a trend of flocking to P2P companies that are not subject to various regulations such as LTV and Debt Service Ratio (DSR). According to the 'P2P Mortgage Loan Handling Status Report' recently obtained by the office of Kim Byung-wook, a Democratic Party member, through the Online Investment-Linked Finance Association task force, as of last month, the outstanding mortgage loan balance of 34 P2P companies was 446.232 billion KRW, of which loans in the LTV 70-90% range accounted for 237.1433 billion KRW, about half of the total loans. Loans in the LTV 50-70% range were 157.48538 billion KRW, and loans exceeding 90% LTV amounted to 2.47 billion KRW.

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