From June, DSR Will Not Apply to Jeonse Fraud Victims

Starting from the 1st of next month, loan regulations for victims of jeonse fraud will be eased, and the registration of delinquency information related to jeonse loans will be deferred.

The Financial Services Commission announced on the 28th that these measures will be implemented in line with the enactment and enforcement of a special law to support victims of jeonse fraud on the 1st of next month.

First, the Financial Services Commission decided to temporarily ease household loan regulations such as the Loan-to-Value ratio (LTV) and Debt Service Ratio (DSR) for one year within a limit of 400 million KRW. The LTV for auction funds (funds required for winning a property at auction) will be allowed up to 100% of the winning bid price. For general loans for new home purchases, the LTV will be increased from 70% to 80% based on non-regulated areas.

DSR will also not be applied. DSR is the ratio of annual principal and interest repayment to annual income, and is regulated at 40% per borrower if the loan amount exceeds 100 million KRW. Since victims of jeonse fraud who have already taken out jeonse loans may be restricted by the DSR limit when receiving auction fund loans, the related regulations will be temporarily lifted.

To prevent victims from becoming credit delinquents, measures such as interest-free installment repayment and deferral of delinquency information registration will also be implemented. If jeonse loan debts remain after the completion of auction or public sale, guarantee institutions such as the Korea Housing Finance Corporation will be able to make subrogation payments and allow interest-free installment repayment for up to 20 years. Based on the conclusion of an installment repayment agreement, delinquency and other credit evaluation information will not be registered for six months after subrogation payment.

Additionally, if victims acquire residential property through auction or purchase a new home, they will be able to use the special BoGeumJaRi loan, a policy fund, at an interest rate of 3.55% to 3.95% per annum. Low-income youth victims will be offered the lowest interest rate of 3.55% per annum.

Jeonse fraud victims facing financial difficulties can receive up to 12 million KRW through the Microfinance 'Vulnerable Group Self-Reliance Fund Loan,' a credit loan with an interest rate of 3% per annum. Eligible applicants include those in the bottom 20% of personal credit scores, basic livelihood security recipients, near-poverty groups, and Earned Income Tax Credit recipients.