The Construction King Gang Expands Houses Infinitely with 300 Billion Won Loan... Special Law Fails Again

Total Jeonse Deposit Approximately 200 Billion KRW
Only 25.2 Billion KRW in Normal Jeonse with HUG Guarantee Insurance Enrollment

The outstanding loan balance of Nam Mo (62), the so-called ‘Construction King’ who caused a large-scale jeonse fraud victimization in Michuhol-gu, Incheon, is estimated to exceed 300 billion KRW. In particular, considering the circumstances where he expanded his business by raising project financing (PF) loans exceeding the total jeonse deposit, it appears that he increased the number of houses by paying only the loan interest instead of repaying the principal. Therefore, when the pressure of rising interest due to interest rate hikes and falling house prices overlapped, he fell into financial difficulties, and the damage was directly passed on to the tenants.

According to the data on the ‘Scale of Jeonse Deposit Damage for Buildings Owned by Mr. Nam’ received from the Michuhol-gu Jeonse Fraud Victim Countermeasure Committee on the 4th, the number of jeonse fraud victim households identified as of the end of February was 2,734 households. The committee compiled this by gathering information from a whistleblower affiliated with Nam, viewing the registry copies of the apartments where the jeonse fraud occurred, real estate contracts, and interviews with victims.

The total amount of jeonse deposits for these households was 195.7 billion KRW, of which only 25.2 billion KRW (12%) was covered by normal contracts such as subscription to the Jeonse Deposit Return Guarantee Insurance by the Housing and Urban Guarantee Corporation (HUG). The Michuhol-gu Office recently identified that only 874 households could receive priority repayment. Considering that the average jeonse deposit for the fraud apartments is about 70 to 90 million KRW, approximately 100 billion KRW, excluding 80 to 90 billion KRW, is unlikely to be compensated. This amount is about one-third of the jeonse deposit accident amount (342.2 billion KRW) that occurred last year and twice the amount of the guarantee accident caused by the worst malicious landlord last year (55.4 billion KRW).

Nam increased the number of houses by renting out rental housing on jeonse and combining the deposits received from tenants with loans secured by the houses he owned. The committee’s own estimate of Nam’s loan amount is 332.3 billion KRW. This is the sum of the maximum claim amounts recorded in the registry copies of the victim apartments. Typically, the maximum claim amount is set higher than the actual loan amount to cover cases where the borrower defaults on interest or fails to repay the debt. For example, an actual loan of 100 million KRW is not recorded in the registry, but an amount 110-130% of 100 million KRW is recorded. Considering this, the amount Nam Mo procured through savings banks, local agricultural cooperatives, fisheries cooperatives, and Saemaeul Geumgo is estimated to be about 300 billion KRW. This exceeds the total deposits of 195.7 billion KRW by a whopping 100 billion KRW. Even considering the rental deposits and monthly rent income (about 2 billion KRW) from the houses Nam rented out, he has a financial structure that requires paying a substantial amount of loan interest every month. Victims expressed frustration, saying that even if there are surplus assets excluding the Michuhol-gu jeonse deposits, the business structure is inevitably doomed to fail.

Nam, who increased the number of houses by building new buildings with funds covered by actual deposits and loans, faced financial difficulties as loan interest rates rose and house prices fell, leading to a situation where he could not return the jeonse deposits. Houses could not be sold, bank interest could not be paid, and recovering the jeonse deposits became difficult. In other words, after raising loans to build houses, when tenants could not be found, he rented them out at prices lower than market value, and when contract holders hesitated due to the large loans, he reassured them by promising to provide a letter of guarantee. However, on the day the next jeonse deposit was received, he did not release the mortgage cancellation, resulting in the property being auctioned later.

At the second trial held on the 3rd, Nam Mo denied all charges including fraud, violation of the Real Name Real Estate Act, and violation of the Licensed Real Estate Agent Act. Ultimately, the second trial ended without significant progress, failing to clarify legal issues. On the same day, the special law on jeonse fraud discussed at the National Assembly Land, Infrastructure and Transport Committee’s bill subcommittee also failed to be passed due to unresolved differences between the ruling and opposition parties. As a result, the expected passage of the special law originally anticipated this week is likely to be delayed until next week.

Lee Eun-hyung, a research fellow at the Korea Construction Policy Research Institute, said, "Since jeonse is a private contract between individuals, it is difficult for the government to step in and compensate for the damages." He added, "If the victims are not those who can recover their deposits late, it is urgent to support housing stability through a special law for jeonse fraud victim support." Reporter Kim Min-young

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