The administrative guidance to prevent savings banks and specialized credit financial companies from circumventing regulations on housing mortgage loans (home loans) with lending agents will be extended until March 1 of next year.
According to the financial sector on the 21st, the Financial Supervisory Service recently decided to extend the expiration of the administrative guidance on 'risk management standards for loans secured by housing mortgages' in savings banks and the second financial sector for another year until March of next year. The administrative guidance is a measure to block cases where savings banks and second financial sectors utilize lending companies to circumvent home loan regulations.
Lending companies set a mortgage on real estate while handling home loans and borrow funds from savings banks or capital firms, using these as collateral. In this process, some savings banks and second financial sectors applied loans exceeding the housing mortgage loan-to-value (LTV) ratio, which became problematic. This is a workaround loan that exploits the lack of LTV regulations.
Financial authorities have started to apply loan regulations, including LTV limits, to housing mortgage loans secured by savings banks and second financial sectors in order to eradicate illegal activities related to the real estate market. Previously, individuals looking to obtain home loans could borrow money from lending companies, allowing those companies to finance without LTV regulations by using this debt as collateral with savings banks or second financial sectors.
This has led to the criticism that individuals are essentially obtaining loans from savings banks and second financial sectors without being subject to LTV regulations, described as 'loophole loans.' Financial authorities have moved to block these loophole loans through administrative guidance.
The FSS explained, 'We want to extend the expiration period to prevent cases where savings banks or second financial sectors execute loans secured by mortgages on home loans that exceed the LTV limits set by lending agents.'