The Financial Services Commission is considering preparing guidelines for exceptions to real estate lending regulations. The Financial Services Commission (FSC) had initially planned to let banks individually decide whether to apply regulatory exceptions for jeonse loans to nonresident single dwellings owners and whether to offer loan-to-value (LTV) benefits to first-time dwellings buyers who failed to receive them. But as criticism emerged in the industry that it was shifting responsibility to banks for judging exceptions, it appears to have partly shifted its stance.
According to the financial authorities on the 19th, the Financial Services Commission (FSC) plans to soon solicit opinions from major banks on the need for guidelines that specify criteria for exceptions to real estate lending regulations. If such guidelines are prepared, they are expected to include specific standards for whether first-time dwellings buyers qualify for LTV benefits and for exceptionally allowing jeonse loans to nonresident single dwellings owners. The Financial Services Commission (FSC) plans to review banks' operating conditions after the regulations take effect next year and, if necessary, issue guidelines.
Through the Aug. 13 comprehensive real estate finance plan, the financial authorities decided to completely block jeonse loans for nonresident single dwellings owners starting next year. However, if there is a record of registering an address at a owned dwellings even once, it will be recognized as actual residence, and in unavoidable cases, exceptions will be applied after review by the banks' credit review committee.
It was also decided that borrowers who, due to unavoidable reasons such as inheriting equity in a dwellings early because of a parent's death during minority, cannot receive the 70% LTV preference for first-time dwellings buyers, will be granted exceptions after review by the banks' credit review committee.
Initially, the financial authorities' position was to leave judgments on specific exception criteria to the banks' credit review committees. Yoon Deok-gi, head of the macrofinance team at the Financial Services Commission (FSC), said at a briefing on the 14th, "The banks' credit review committee is an organization established in 2018 and has judged various matters regarding risks on credit. It can operate based on that know-how," and added, "If necessary, the Financial Services Commission (FSC) can provide an authoritative interpretation. There is no plan to create guidelines for reasons for regulatory exceptions."
However, the industry criticized that the financial authorities were shifting responsibility to banks. A commercial bank official said, "The credit review committee is a place that makes decisions on conducting large-scale loans and is not a place to discuss the household loan system," and added, "The financial authorities do not want to be directly attacked over issues related to real estate loans, so they are shifting responsibility."
An official at the Financial Services Commission (FSC) said, "Our position remains that there is no problem if banks proceed according to their existing loan screening practices," but added, "As views on the ground may differ, we plan to gather opinions from major banks. We will allow sufficient time to review the situation before the actual implementation of the system."