Household Debt Restructuring Financial Companies, Significant Reduction in KODIT Contribution Fees

Maximum Increase of 0.04%P in Preferential Rate
Clarification of Overpayment and Contribution Settlement Method

[Asia Economy Reporter Kwangho Lee] From next year, the contribution fee to the Housing Finance Credit Guarantee Fund will be significantly reduced for financial institutions that have contributed to improving the structure of household debt.

The Financial Services Commission (FSC) announced on the 10th that it will issue a legislative notice for the amendment of the Enforcement Rules of the Korea Housing Finance Corporation Act, which includes such measures as a follow-up to the "Strengthening Household Debt Management Plan."

Last month on the 26th, the FSC announced the strengthening of household debt management measures and set the target for individual mortgage loan installment repayments at 80% from the previous 73.8% starting next year.

The contribution rate for financial institutions is determined by adding the differential rate and preferential rate to the base rate. Among these, the preferential rate provides a reduction of 0.01% to 0.06% depending on the financial institution’s achievement of targets such as the proportion of fixed-rate and installment repayment loans.

This amendment aims to encourage financial institutions' efforts in structural improvement by expanding the preferential rate range from the existing 0.01%?0.06% to 0.01%?0.10%, an increase of 0.04 percentage points.

An FSC official explained, "(This announcement) is intended to induce the qualitative soundness of financial institutions’ household debt by expanding the preferential contribution rate linked to the performance of installment mortgage loan handling."

Specifically, if the target overachievement is between 0 and 0.3 percentage points, the current 0.01% preferential rate will be increased to 0.02%, an increase of 0.01 percentage points. For overachievement between 0.3 and 0.6 percentage points, the preferential rate will increase from 0.02% to 0.03%. For 0.6 to 0.9 percentage points, it will increase from 0.03% to 0.05%. For 0.9 to 1.2 percentage points, it will increase from 0.04% to 0.07%. For over 1.5 percentage points, it will increase from 0.06% to 0.10%.

The FSC also plans to clearly stipulate in the law the method of settling overpaid contributions, which is currently regulated by the internal rules of the Housing Finance Corporation.

The FSC will publicly announce the amendment to the Enforcement Rules of the Korea Housing Finance Corporation Act for 40 days from today until the 20th of next month, collect opinions, and implement it from January next year.

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