[Jeonse Deposit Crisis]③ "Temporary Relaxation of Jeonse Eviction Loan Regulations Needed"

"Gap speculation is despicable, but expansion is needed to protect tenants"

[Asia Economy Reporters Yu Je-hoon and Bu Ae-ri] As issues related to the non-return of security deposits, such as "reverse jeonse," show signs of expansion, the government has also stepped up to devise countermeasures. While easing regulations on loans for moving-out funds related to jeonse, the government has additionally prepared measures to guarantee tenants' right to know and to support victims of security deposit non-return incidents. Experts unanimously agree that, alongside further easing of related regulations, additional measures are needed to prevent further defaults, such as restricting jeonse loan financing on houses with high leverage.

According to the financial sector on the 9th, the government held a real estate-related ministerial meeting last November and decided to ease mortgage loan regulations aimed at stabilizing living conditions and ensuring the return of tenant deposits. Specifically, the loan limit (KRW 200 million) applied to mortgage loans for living stabilization funds was abolished. Accordingly, authorities plan to allow mortgage loans for the purpose of returning tenant deposits even to borrowers owning apartments exceeding KRW 1.5 billion in speculative or speculative overheating districts. The authorities plan to implement this soon through amendments to banking supervision regulations.

Currently, the loan requirements for jeonse moving-out funds are quite stringent. Previously, in speculative or investment overheating areas, apartments exceeding KRW 1.5 billion had a loan limit of KRW 200 million, and houses exceeding KRW 900 million in regulated areas were subject to a mandatory move-in within 90 days. Additionally, two-homeowners in regulated areas were required to dispose of other owned homes, and loans were restricted for those owning three or more homes. Considering that these loans are a type of mortgage loan, regulations such as Loan-to-Value (LTV) and Debt Service Ratio (DSR) still apply, making the threshold quite high.

Furthermore, the government has begun institutional improvements to prevent tenants from falling victim to "empty jeonse" or jeonse fraud. On January 3rd, the Ministry of Land, Infrastructure and Transport announced in its New Year work report plans to grant tenants the authority to request information on senior priority rights and tax payment certificates. Additionally, to prevent landlords from secretly obtaining senior priority mortgage loans without tenants' knowledge, commercial banks will be granted the authority to verify fixed dates. Measures such as low-interest loans at around 1% and shortening the Housing & Urban Guarantee Corporation (HUG) deposit return review period for victims of jeonse fraud are also planned.

Experts positively evaluate these government measures but agree that temporary regulatory easing for multi-homeowners and rental business operators is necessary to prevent tenant damages caused by the spread of reverse jeonse. Kim Hyo-sun, Senior Real Estate Specialist at NH Nonghyup Bank, said, "Since the number of reverse jeonse cases has already increased compared to usual years, some degree of regulatory easing is necessary," adding, "While there is no need to adjust the amount limit, expanding jeonse moving-out fund loans to multi-homeowners, if the loan is for deposit return purposes, is also necessary."

Professor Seo Ji-yong of the Department of Business Administration at Sangmyung University also stated, "Investment is the individual's responsibility, so it is understandable to feel resentment toward gap speculation, but it is desirable to temporarily ease the loan conditions for jeonse moving-out funds to protect tenants," adding, "There is also a ban on jeonse loans for houses over KRW 900 million, which should also be considered for temporary easing."

There are also calls to restrict jeonse loans on houses with high jeonse ratios or high loan proportions to prevent security deposit non-return incidents. Min Byung-chul, Research Fellow at the Korea Housing Finance Institute, said, "For properties owned by multi-homeowners with high leverage or gap investments, the government should establish specific management standards and adjust so that these properties do not enter the jeonse market."

Kang Min-seok, Head of the Real Estate Team at KB Financial Management Research Institute, also said, "It is necessary to restrict jeonse loans on houses where the loan proportion exceeds a certain level," adding, "Most of these houses are villas or other housing for ordinary citizens, so there may be consumer complaints, but restrictions are necessary as risky situations could recur in the future."