FSC to tighten jeonse loans for non-resident homeowners, weigh exemptions for group loans

The Financial Services Commission plans to release a comprehensive housing finance package — incorporating public feedback from a national real estate policy forum chaired by President Lee Jae Myung — in the near future.

The most likely approach would tighten jeonse loans for non-resident single homeowners, a concern the FSC has flagged since early this year, while easing restrictions in a targeted manner for genuine end-users such as young adults and newlyweds. The overall aggregate household loan management framework is expected to remain intact, but the FSC is likely to carve out alternatives for group and relocation loans squeezed under the current regime.

Financial industry sources said Friday that the FSC held an internal meeting Thursday to broadly review the issues raised at the forum. Key market-sensitive topics surfaced at the event — including aggregate loan caps, regulatory benchmarks, jeonse loans, and group and relocation loans — with participants largely calling for easing across the board.

A senior FSC official said the commission would review all opinions raised at the forum, adding that many of the issues had already been flagged in the government's second-half economic policy direction. "We plan to take a comprehensive look and announce measures in a timely manner," the official said.

Among the items on the FSC's policy agenda, tightening jeonse loan rules for non-resident single homeowners is seen as the most immediately actionable. President Lee has signaled his intent to address the issue since early this year, and at Thursday's forum he identified jeonse loans as a primary driver of gap investment — the practice of buying a home using a tenant's jeonse deposit — and a key cause of surging home prices, strongly pressing the case for regulation.

The FSC has been deliberating specific measures, including blocking public guarantees on jeonse loans for non-resident single homeowners in the Greater Seoul area and other regulated zones. FSC Secretary General Shin Jin-chang recently confirmed at a pre-briefing for a work report that the commission has a proposal ready on non-resident single-homeowner regulations, signaling that related tightening measures are expected to be formalized swiftly through the forthcoming comprehensive package.

The contours of the exemption criteria — a key sticking point in the non-resident single-homeowner debate — are also coming into focus. At the forum, President Lee made clear that exceptions would be granted for cases involving job relocation, children's education or medical treatment, which would be treated as legitimate residential needs. The FSC plans to establish precise guidelines to prevent genuine end-users from being caught in the net.

On the broader demands raised at the forum — easing aggregate loan caps and raising loan ceilings — financial authorities are maintaining a cautious stance. Their concern is that loosening lending conditions could overheat the real estate market and conflict with the policy goal of redirecting capital toward productive investment.

Authorities are particularly worried about adding fuel to the recent surge in household borrowing driven by debt-financed investment. The combined household loan balance at the five major banks — KB Kookmin, Shinhan, Hana, Woori and NH NongHyup — stood at 649.66 trillion won ($442 billion) as of July 15, already exceeding the financial authorities' target by about 350 billion won.

Targeted, surgical adjustments for vulnerable groups, however, are seen as a strong possibility. President Lee repeatedly stressed at the forum the need for targeted support for genuine end-users — including low-income households without homes, young adults and newlyweds — who struggle to secure financing. The FSC is therefore expected to reflect in its comprehensive package a degree of flexibility: keeping the aggregate loan management framework broadly intact while modestly easing restrictions for young adults and newlyweds.

Finding solutions for group loans and relocation loans is another task before the FSC.

President Lee directly instructed the FSC to examine a citizen's request that group loans be excluded from aggregate loan management targets. Within the financial industry, one option being discussed is exempting from the aggregate cap projects whose tenant recruitment notices were issued before the government announced its regulatory measures. Financial authorities are currently surveying how many such cases exist nationwide.

For relocation loans, a conditional increase in the loan-to-value ratio — limited to actual residents — is being discussed. The proposal stems from concerns that homes slated for reconstruction or redevelopment tend to carry low appraised values, making it difficult for residents to secure a jeonse unit during construction under the current 40 percent LTV ceiling.

The FSC is also broadly reviewing expert proposals, including restructuring existing loans and introducing a macroprudential management levy.

Lee Gwang-su, head of the YouTube channel "Gwangsu's Real Estate Corner," told the forum that "current loan regulations apply only to new borrowers. People who already took out loans and bought homes have seen their property values rise significantly, yet there are no regulations targeting them," and called for LTV, the total debt-to-income ratio and the debt service ratio to be applied equally to existing borrowers. President Lee called the idea "a fresh way of thinking" and said he shared the same sense of the problem.

The macroprudential management levy, proposed by Kim Young-do, a senior research fellow at the Korea Institute of Finance, would function as a surcharge — separate from the loan interest rate — imposed on borrowers as a form of economic risk management cost, targeting high-credit borrowers or those with large mortgage loans. Under one example, a 1 billion won mortgage would carry a levy of 10 million won ($6,800). Revenue collected from the levy would be channeled into residential support for vulnerable households.