[1mm Financial Talk] Financial Services Commission Reverses Refinancing Loan Regulation... Ministry of Land Vice Minister Resigns

Easing of Refinancing LTV Regulations Following Land Ministry Controversy
"Unrelated to New Housing, Focused on Reducing Interest Burdens"

Lee Eokwon, Chairman of the Financial Services Commission, attended the joint briefing on housing market stabilization measures held on the 15th at the Government Seoul Office in Jongno, Seoul, and announced real estate measures. The announcement was attended by Deputy Prime Minister and Minister of Economy and Finance Koo Yoonchul, Minister of Land, Infrastructure and Transport Kim Yoonduk, Director of the Office for Government Policy Coordination Yoon Changryul, and Commissioner of the National Tax Service Lim Kwanghyung. 2025.10.15 Photo by Jo Yongjun

Following the announcement of the October 15 real estate measures, the contrasting responses of the Ministry of Land, Infrastructure and Transport and the Financial Services Commission have drawn attention. The Financial Services Commission, which is responsible for loan regulations, promptly eased the loan-to-value (LTV) ratio regulations for mortgage refinancing after public opinion on the real estate measures deteriorated. In contrast, the Ministry of Land, Infrastructure and Transport is facing repercussions, including the resignation of its First Vice Minister. Within government circles, there is an assessment that the Financial Services Commission's political judgment, shaped by its frequent exposure to political headwinds such as search and seizure investigations and its narrow escape from organizational restructuring discussions among central government agencies, influenced its response this time.

Last week, the Financial Services Commission decided to apply the LTV ratio at the time of origination for mortgages in regulated areas. However, as complaints surged among genuine homebuyers that even "loan switching" aimed at reducing interest burdens was being further restricted, the commission internally reviewed the matter and decided to revert the LTV regulation for refinancing loans to its previous level.

An official from the Financial Services Commission explained, "In principle, we eased the regulation, considering the policy intent of reducing interest burdens without generating new loans or new housing demand from the banks' perspective."

Contrary to the official stance of the Financial Services Commission, some in government circles analyze that political judgment played a significant role. Previously, Lee Sangkyung, former Vice Minister of the Ministry of Land, Infrastructure and Transport, appeared on the YouTube channel "Booiknam" immediately after the October 15 real estate measures were announced and remarked, "If the market stabilizes and housing prices fall, you can buy then." After the video was released, public opinion worsened, and although Lee issued a public apology, criticism only intensified.

The Financial Services Commission officially announced the easing of the refinancing LTV regulation on the afternoon of the 24th, when the controversy was at its peak. Ultimately, Lee Sangkyung tendered his resignation, and President Lee Jaemyung accepted it on the 25th, just one day later.

Yonhap News Agency

An official from a central government agency stated, "After the controversy over the remarks by the former Vice Minister of the Ministry of Land, Infrastructure and Transport, it appears that the Financial Services Commission reconsidered loan regulations from the demand side," adding, "It is likely that not only policy considerations but also political judgment were involved."

The Financial Services Commission is considered one of the central government agencies that has most frequently experienced prosecutorial search and seizure. Such investigations have occurred in connection with the 2017 Samsung Biologics listing and the Samsung C&T-Cheil Industries merger allegations, the 2019 investigation into misconduct by commission officials, and the 2020 Lime Asset Management scandal.

The Financial Services Commission is not only responsible for domestic financial policy but is also involved in a wide range of areas, including corporate restructuring. For this reason, the commission has often become a primary target during political investigations. Consequently, it is known for its organizational culture of meticulously recording policy decisions from senior officials to working-level staff, and for making extremely cautious decisions on matters that could pose risks.

Moreover, since experiencing the brink of organizational dissolution after the launch of the new administration, the commission is seen as having no choice but to make swift political judgments whenever announcing financial policies. Even within the commission, there is recognition of the importance and sensitivity of these issues, with internal discussions highlighting "tariff negotiations and real estate policy as the most pressing matters." Accordingly, it is interpreted that the commission is responding flexibly to loan regulations in order to minimize the fallout from worsening public opinion.