Jeonnam Police Arrest Three Main Suspects for Fraudulently Obtaining Jeonse Loan Funds

Expansion of Investigation into Accomplices and Additional Crimes

The Anti-Corruption and Economic Crime Investigation Unit 2 of the Jeonnam Provincial Police Agency announced on the 21st that they have arrested and detained three individuals on charges of embezzling jeonse loans guaranteed by the Korea Housing Finance Corporation.

They are continuing to investigate real estate agents and name lenders involved in the crime.

The suspects are accused of embezzling approximately 5 billion KRW by using false buyers to obtain mortgage loans on unsold apartments and villas, transferring ownership, and then recruiting additional false tenants to secure jeonse loans fraudulently.

They reportedly purchased unsold apartments and villas in areas such as Hwasun, Gwangju, and Gyeonggi Province under false buyer names, and conspired with name lenders to fraudulently enter into jeonse contracts.

The jeonse loan guarantee provided by the Korea Housing Finance Corporation is a consignment guarantee, where the lending bank handles all loan and guarantee processes. If the tenant has issues repaying overdue amounts, the Korea Housing Finance Corporation steps in to repay the loan on their behalf.

Police investigations revealed that since 2020, the suspects recruited false landlords and tenants using this method and obtained jeonse loans under false names for a total of 16 properties in Jeonnam’s Hwasun, Yeosu, Naju, Gwangju, Seoul, and Gyeonggi’s Gwangju and Icheon areas until their arrest.

The loan qualification requirements are not as stringent as general mortgage loans, requiring only certain documents. The lending financial institutions, backed by the Korea Housing Finance Corporation’s guarantee, do not verify actual residence but approve loans based solely on paperwork, which the suspects exploited.

As a result, false tenants failed to return the jeonse deposits, causing the Korea Housing Finance Corporation to repay the deposits for all 16 properties. Unverified jeonse loan cases are expected to increase in damage as lease periods expire.

In July 2022, during a nationwide special crackdown on jeonse fraud, police obtained intelligence confirming that multiple units of ‘R Villa’ in Hwasun County were processed for fraudulent loans under false landlord and tenant names.

After verifying property owners and tenants, the investigation began. Police secured guarantee documents from the Korea Housing Finance Corporation, real estate registration, jeonse contracts, loan applications, statements from property owners and bank officials, and other evidence. They arrested and detained Mr. A, Mr. B, and Mr. C, apprehended four others without detention, and continue to investigate remaining accomplices.

The police urged special caution when entering into lease contracts, as jeonse fraud cases, including those involving unsold housing purchases followed by rental and failure to return deposits after lease termination, are rapidly increasing, with victims even dying in some cases.

The Jeonnam Provincial Police Agency stated, “We will thoroughly investigate the organization of the criminal group, confiscate criminal proceeds, uncover additional crimes, and investigate accomplices related to this ‘fraudulent loan and jeonse fraud’ case. We also plan to strictly respond to jeonse fraud crimes that cause suffering to ordinary citizens.”