Even with auction delays up to 4 months... Only worsening bank insolvency

1066 Households in Michuhol-gu Under Auction and Public Sale
President Yoon Orders "Suspension or Postponement of Auction Schedule"
Delaying Auction Schedule May Affect Financial Institutions' Liquidity

The government has decided to temporarily request a postponement of auctions from financial institutions that have filed for auctions in relation to the issue of tenants who have fallen victim to jeonse fraud losing their deposits when their homes go to auction. However, voices calling for more fundamental measures are growing. Even if financial institutions accept the government's request to delay auctions, the resulting losses would inevitably be borne by the financial institutions, which only exacerbates bank insolvency and is not seen as a practical remedy for jeonse fraud.

Jeonse fraud victims hold a press conference on the 18th in front of the Presidential Office in Yongsan-gu, Seoul, urging the establishment of measures to address jeonse fraud damage. Photo by Dongju Yoon doso7@

According to the Jeonse Fraud Victims Countermeasure Committee in Michuhol-gu on the 19th, among the 1,787 households in 32 apartments and villas registered with the committee, about 60%, or 1,066 households, have already gone to auction or public sale. Of these, 106 households have been sold through bidding, and 261 households are in the process of being sold. In other words, over 1,000 households are forced to find new homes without having recovered their deposits. Considering that there are more than 3,000 jeonse fraud victim households in the Incheon area alone, the number of tenants who must vacate their homes is expected to increase.

The committee has demanded administrative orders to suspend or postpone auctions of the victim households, stating that forced eviction is inevitable once the auction ends. When victims of jeonse fraud cannot repay existing loans and their homes go to auction, it becomes difficult to recover their deposits, and they face the double burden of having to secure additional funds to sign new lease contracts. Typically, jeonse fraud properties go through multiple failed auctions, causing prices to drop significantly below market value. The primary creditor bank recovers its loan amount first, and the remaining amount is returned to the subordinate tenants as deposits, but it is common for tenants to receive only a small portion or nothing at all. In this process, three young tenants who were victims of jeonse fraud in the Michuhol-gu area of Incheon recently took extreme measures within two months. However, according to the committee, the Incheon city government only conveyed these demands to the Ministry of Land, Infrastructure and Transport after the third victim died by suicide due to jeonse fraud.

Following the consecutive deaths of young tenants, President Yoon Suk-yeol, at a Cabinet meeting held at the Yongsan Presidential Office on the 18th, received a report from Minister of Land, Infrastructure and Transport Won Hee-ryong on measures to suspend or postpone auction schedules and ordered their implementation. In this regard, the Ministry of Land, Infrastructure and Transport decided to temporarily request auction postponements from financial institutions that have applied for auctions.

However, it does not seem easy for financial institutions to accept this. Banks holding mortgage rights typically proceed with voluntary auction procedures to recover loans if the debtor is overdue on principal and interest payments for more than three months. If the auction is stopped, the bank cannot recover its claims, which could affect the bank's liquidity by the amount overdue. Thus, stopping auctions would inevitably cause banks to bear losses.

Even if auctions are postponed, only up to four months can be gained, so it is difficult to see this as a fundamental solution. Joo Hyun Lee, a senior researcher at Gigi Auction, said, "According to the Civil Execution Act, there are provisions for postponement requests, and usually, postponement can be requested up to twice," adding, "Each postponement is about two months, so the auction date can be delayed for a total of four months."

If there are special circumstances, the court may, at its discretion, postpone the sale date for more than four months, but this is not common. Unlike public institutions such as the Korea Asset Management Corporation (KAMCO), banks are private companies. While the government can recommend banks to postpone auctions, it is difficult to compel them. Moreover, even if banks accept the government's request to delay auctions, concerns about fairness may arise. The senior researcher said, "Among properties currently under auction, many tenants suffer losses, so if only jeonse fraud cases are remedied, fairness issues could arise." Some argue that ultimately, the government must step in and promise to bear all the insolvency risks of financial institutions holding the claims.

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