[2020 National Audit] Housing Finance Corporation Neglects Low-Income Groups, Focuses Solely on Apartment Guarantees... CEO Lee Jeong-hwan "Will Improve"

Korea Housing Finance Corporation: Apartments Account for Half of Mortgage Guarantees in the Last 5 Years
Rejection Rate for Single-Family and Multi-Family Guarantees About 2.5 Times Higher Than Apartments
"Guarantee More Than Half for Apartments" Intentional Recommendation to Banks

MCG Guarantee Approval and Rejection Status by Housing Type (2016 to August 2020)

[Asia Economy Reporter Park Sun-mi] It has been revealed that more than half of the mortgage loan guarantees backed by the Korea Housing Finance Corporation (KHFC) are concentrated in apartments, and that KHFC had intentionally encouraged increasing apartment collateral. Lee Jeong-hwan, president of KHFC, belatedly admitted the mistake and announced plans to improve the guarantee ratio by housing type.

On the 21st, Song Jae-ho, a member of the National Assembly's Political Affairs Committee from the Democratic Party of Korea, based on data submitted by KHFC, the guarantee rate by housing type for the mortgage loan product, the Mortgage Credit Guarantee (MCG), from 2016 to August this year showed a concentration phenomenon with apartments accounting for more than half at 50.7% (210,842 cases). Meanwhile, guarantees for row houses and multi-family houses accounted for 36.7% (152,693 cases), and detached and single-family houses only 2.9% (11,874 cases).

The guarantee imbalance between apartments and detached/multi-family houses is even more evident in guarantee rejection rates. Apartment guarantee rejections were 3,556 cases, only 1.6% of the total 214,198 applications over the past five years, whereas row houses and multi-family houses had a rejection rate of 2.4% (3,737 cases), and detached/single-family houses 3.9% (480 cases). The rejection rate for detached/single-family houses over the past five years is about 2.5 times higher than that for apartments.

The background for the imbalance in guarantee ratios by housing type lies in KHFC's recommendations. Since 2017, KHFC has recommended to the heads of eight banks including KB Kookmin, Shinhan, and Hana that at least 50% of MCG guarantees be handled for apartments. This is because if the guarantee proportion for row houses or multi-family houses increases, the guarantee accident rate could also rise from KHFC's perspective.

Assemblyman Song stated, "It is inappropriate that the corporation, which should implement policies considerate of low-income households, instead recommended increasing apartment guarantees focusing on the profit and loss aspects of guarantees," and advised, "The corporation needs to consider providing equitable guarantee benefits for detached and single-family houses, which are mainly inhabited by vulnerable low-income households, comparable to those for apartments.” In response, Lee Jeong-hwan, president of KHFC, admitted, "We had recommended each bank to maintain an apartment guarantee ratio of over 50%," and promised, "We will review and improve the recommendation to maintain over 50% as soon as the national audit is over."