Up to 2.7% Didimdol Loan for Jeonse Fraud Housing Auction... Move-in Without LH Public Rental Requirements

The special law announced by the government on the 27th to support victims of jeonse fraud includes provisions to assist affected tenants in purchasing their leased homes through auctions or having the public sector purchase the homes for rental housing. Emergency welfare and credit loan support measures are also additionally included. Although low-interest loans and emergency housing have been provided to victims through four previous measures, there were criticisms that these efforts had limitations in resolving housing insecurity for victims facing eviction due to auctions. Accordingly, the special law was enacted to establish comprehensive support measures.

Seoul Jung-gu Woori Bank Headquarters Branch Counter / Photo by Yonhap News

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First, regarding the purchase of the home where the victim resides, the current auction postponement and suspension, which is carried out at the request of financial authorities, can now be directly applied for by victims of jeonse fraud. Victims are also granted priority purchase rights. When registering for priority purchase, the home can be purchased at the highest bid price, and if the tenant wishes, it can be transferred to LH.

Additionally, if the landlord has a large amount of tax arrears, tax claims are divided by individual homes so that affected tenants can receive dividends. Originally, if a landlord who owed 10 billion KRW in taxes had 1,000 homes auctioned, all homes would reflect senior tax claims, and the full bid price of homes auctioned first would be collected as taxes. However, with the passage of the special law, tax claims will be divided by home, so only part of the bid price will go to taxes, and the rest will be distributed to the affected tenants. During home auctions, tax authorities will separately recover only the tax arrears for the specific home.

If victims of jeonse fraud purchase the home they reside in or buy a new home, they will receive Didimdol loans at an annual interest rate of 2.7%. This is the same standard as the top preferential conditions for newlyweds. Loans will be available at lower interest rates by income, ranging from 1.85% to 2.70%, compared to the general rate of 2.15% to 3.00%. The loan limit increases from the existing 250 million KRW to 400 million KRW, and the grace period extends from a maximum of one year to three years. For special Bogeumjari loans, victims receive a 0.4 percentage point interest rate discount regardless of income, and the grace period is extended up to three years.

Loan regulations such as loan-to-value ratio (LTV) and debt service ratio (DSR) by private financial institutions will be temporarily relaxed for one year. Within the loan limit of 400 million KRW, LTV will be expanded to 100% of the auction bid price for auctioned homes and up to 80% for general mortgage loans in non-regulated areas. DSR application will be excluded. The repayment period for remaining jeonse loan debts after auction or public auction will be extended from the current maximum of 10 years to 20 years, and registration of credit information such as delinquency data will be deferred.

Tax support includes a 2 million KRW cap on acquisition tax reduction and exemption of registration tax when purchasing leased homes. Property tax will be reduced for three years (50% for exclusive areas under 60㎡, 25% for over 60㎡). Extensions of local tax payment deadlines and deferrals of collection, notification, and delinquency measures will also be implemented (up to one year).

At the same time, situations where landlords have large tax arrears making auction applications practically impossible or causing significant dividend losses even if auctions proceed were also considered. Accordingly, the landlord’s total tax arrears will be divided by individual homes, and tax authorities will separately recover only the tax arrears for the specific home during auctions. For example, if a landlord with 10 billion KRW in tax arrears owns 1,000 homes each auctioned at 100 million KRW, previously, all homes reflected senior tax claims of 10 billion KRW. However, in jeonse fraud cases, tax claims will be distributed as 10 million KRW per home.

Homes purchased by LH through the transfer of priority purchase rights will be operated as public rental housing within this year’s business plan scale of 35,000 units (6.1 trillion KRW). In this case, victims are not subject to eligibility criteria such as earning less than 70% of the average urban worker’s monthly income. Rent will be 30-50% of market price, and the maximum residence period is 20 years, the same as current purchase rental supply conditions. If LH cannot purchase due to bid price or home condition, victims will be given priority to move into nearby similar public rental housing. The government stated, "If demand is high, the budget and supply volume will be expanded, but there is no direct public support or compensation for the victims’ jeonse deposits."

Additionally, if emergency welfare requirements are met, single-person households will receive 620,000 KRW per month for living expenses and 400,000 KRW for housing costs (in metropolitan areas). Credit loans up to 12 million KRW will be available at 3% annual interest. Furthermore, even if auctions or public auctions ended within two years before the special law’s enforcement, victims recognized as jeonse fraud victims will receive special treatment. The special law will operate temporarily for two years. The government plans to collaborate with the National Assembly to promptly institutionalize the law after its proposal.

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