Total Volume Regulation Backlash... Real Demand Borrowers Also Blocked from BoGumJaRi Loan (Comprehensive)

Banks Hesitant to Treat Bogumjari Loan Under Total Volume Regulation
Real Demand Borrowers Anxious Before Loan Execution and Application
"Need for Measures Such as Exemption of Policy Mortgages from Total Volume Regulation"

[Image source=Yonhap News]

[Asia Economy Reporter Kim Jin-ho] Office worker Jang Woo-hwan (48 years old, pseudonym), who was filled with dreams of owning a home, received shocking news. Although he had obtained all approvals from the Korea Housing Finance Corporation to receive the government policy mortgage, the bank where he applied told him that proceeding with the loan was difficult. The bank employee advised him to apply for a loan at another bank, citing compliance with the government's household debt total volume management. However, with the loan execution only two weeks away, he found it hard to accept this. Jang said, "There is no problem with my income or credit rating, 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, recently, some disruptions have occurred in new and refinancing Bogeumjari Loans as well. This has led to criticism that the financial authorities' confident assurance that there would be no issues with Bogeumjari Loans for non-homeowners has become meaningless.

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 handling household loans, putting the Bogeumjari Loan, once considered the 'last bastion' for home ownership, at risk of suspension.

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

The reason some banks cannot handle Bogeumjari Loans is largely due to the 'household debt 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 total loan volume until the end of the year inevitably hesitate to sell loans to adjust their loan performance. Since bank cooperation is essential for Bogeumjari Loans, if the bank says it is impossible, 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 to issue 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-based' basis. Bogeumjari Loans are processed by selecting the branch of the bank the borrower wants, but if that branch has no loan quota, borrowers are guided to other branches or even different banks. Recently, inquiries about whether Bogeumjari Loans are suspended or whether individual loans are okay have been flooding the Korea Housing Finance Corporation and bank counters.

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."

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."

Meanwhile, on the same day, Financial Services Commission Chairman Ko Seung-beom met with reporters at the Korea Financial Investment Association in Yeouido, Seoul, and stated, "We will ensure that jeonse loans and group loans are not suspended."

Chairman Ko said, "We are aware of recent concerns related to actual homebuyers," and added, "We will apply the total volume regulation flexibly for jeonse loans until the end of the year." He further stated, "Due to the increase in jeonse loans, household debt may increase by more than 6% this year, but we intend to temporarily tolerate this." Regarding group loans, he said, "We judge that there is no supply problem, but some projects may face difficulties," and promised, "We will monitor with the Financial Supervisory Service and the Korea Federation of Banks to prevent any issues."

The Financial Services Commission plans to announce additional household debt measures as early as next week, focusing on strengthening the effectiveness of the Debt Service Ratio (DSR) management, jeonse loans, and loans from secondary financial institutions.

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