The 'Last Bastion' of Home Loan Programs, Bogeumjari Loan, Also Blocked by Total Household Debt Regulation

Banks Increasingly Reluctant to Handle Bogumjari Loan Due to Total Volume Regulation
Real Demand Borrowers Awaiting Loan Execution and Application 'Anxious'
"Need for Measures Such as Exemptions from Policy Mortgage Total Volume Regulation"

[Asia Economy Reporter Kim Jin-ho] Jang Woo-hwan (48 years old, pseudonym), an office worker who was filled with dreams of owning a home, received shocking news. Although he had received all approvals from the Korea Housing Finance Corporation to obtain the government policy mortgage, the Bank of Housing Finance said it was difficult to proceed with the loan. An employee of the bank advised Mr. Jang to apply for a loan at another bank, citing compliance with the government's household debt total volume management. However, with only two weeks left before the loan execution, he found it hard to accept this. Mr. Jang protested, "Both my income and credit are fine, so why should I suffer due to government regulations?"

The government's 'household debt total volume regulation' is threatening even the Bogeumjari Loan, a loan for actual homebuyers. Following the suspension of Bogeumjari Loan sales through loan agents until the end of the year, recent new and refinancing Bogeumjari Loans are also facing some disruptions. Financial authorities' confident assurances that there would be no problems with Bogeumjari Loans for non-homeowners have proven hollow.

According to the financial sector on the 14th, despite completing all approval procedures at the Korea Housing Finance Corporation, cases of banks refusing or avoiding handling Bogeumjari Loans are emerging one after another. Major banks have already significantly raised the threshold for household loans, putting the Bogeumjari Loan, once considered the 'last stronghold' for home ownership, at risk of suspension.

The Bogeumjari Loan is a fixed-rate mortgage loan provided for homes priced at 600 million KRW or less, with an annual income limit of 70 million KRW (85 million KRW for newlyweds). The maximum term is up to 40 years, and the maximum loan amount is about 360 million KRW.

The reason some banks cannot handle Bogeumjari Loans is largely due to the 'household loan total volume regulation.' Since Bogeumjari Loans are sold using bank funds, the loan is recorded as the bank's loan performance for about 1 to 3 months until the Korea Housing Finance Corporation transfers the bond. Therefore, banks managing their loan volume until the end of the year inevitably hesitate to sell loans to adjust their loan performance. Because the cooperation of banks is essential for Bogeumjari Loans, if a bank refuses, the Korea Housing Finance Corporation has no way to enforce it.

A bank official said, "Until the Korea Housing Finance Corporation purchases the loan assets for issuing asset-backed securities (MBS), Bogeumjari Loans are counted under the total volume regulation, so banks that have reached their loan limit may find it difficult to handle them."

On major financial and real estate communities, criticism is pouring in that even loans for actual homebuyers are being handled on a 'luck-of-the-draw' basis. Bogeumjari Loans allow borrowers to choose the branch of their preferred bank directly, but if the branch has no loan quota, borrowers are guided to other branches or even different banks. In fact, inquiries about whether Bogeumjari Loans are suspended or whether their loans are safe have been flooding the Korea Housing Finance Corporation and bank counters recently.

There are also calls for financial authorities, who pledged to prevent harm to actual homebuyers due to household debt total volume regulation, to pay attention to such 'blind spots.' A financial sector official said, "If Bogeumjari Loans for non-homeowners are suspended, it could cause significant side effects," and suggested, "It seems necessary to manage policy mortgages separately from bank accounts at least until the end of the year."

Meanwhile, a Korea Housing Finance Corporation official said regarding some banks' avoidance of Bogeumjari Loans, "We are monitoring the situation to ensure that actual homebuyers do not suffer any damage."

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