As the reverse jeonse crisis deepens, particularly in the provinces, the easing of regulations on the 'reverse jeonse return loan (loan to refund the jeonse deposit),' which was scheduled to end this year, is expected to be extended.
According to the financial sector on the 28th, the government will hold a Cabinet meeting this week to handle the 'amendment to the Enforcement Decree of the Korea Housing Finance Corporation (HF) Act,' which includes the content of removing the sunset provision for special rental guarantee return products (special return guarantee) for homeowners who received reverse jeonse return loans.
The enforcement decree has stipulated that applications for the special return guarantee can only be made for lease agreements that start before September 30, but this regulation is being removed. The Korea Housing Finance Corporation has temporarily operated the special return guarantee in line with government policies, but has now removed the sunset provision and made the system permanent. This action is in preparation for the further extension of the easing of regulations on reverse jeonse return loans, which are scheduled to end this year.
The reverse jeonse return loan was introduced in July 2023 as reverse jeonse and jeonse fraud emerged as social issues. It is a system that relaxes loan regulations when homeowners cannot return the jeonse deposit at the end of the contract due to falling jeonse prices. When receiving a reverse jeonse return loan, homeowners will have a debt service ratio (DSR) of 40% instead of a total debt repayment ratio (DTI) of 60%.
While DSR is based on the repayment amount of all loans, DTI calculates limits by adding only the interest repayment amounts of other loans to the housing mortgage repayment amount, making it relatively easier to take out additional loans.
Instead, homeowners who receive a reverse jeonse return loan must mandatorily enroll in the special return guarantee. Tenants of dwellings covered by the return guarantee can receive their security deposit from the guarantee institution if the landlord fails to return it after the contract period ends. The government is reportedly in consultations with relevant ministries to extend the current system.
This measure is being taken because the reverse jeonse crisis continues nationwide, excluding Seoul. According to a comparative analysis by the real estate brokerage firm Ziptos of the actual transaction data for nationwide villas and multi-family dwellings in the first half of 2023 and this year, it was found that 31.9% of 46,41 of the same standard jeonse contracts among 10,550 types had a decrease in the jeonse deposit. The regional reverse jeonse ratios were reported as 70.2% in Incheon, 64.3% in Daegu, 52.9% in Gyeongbuk, and 51.4% in Jeonbuk.