Korea Housing Finance Corp. to cut subrogated debt by up to 80%

Borrowers whose jeonse loans were repaid on their behalf by the Korea Housing Finance Corporation will temporarily see their repayment burden reduced.

The Korea Housing Finance Corporation announced Tuesday it will run a "special housing bond debt-adjustment campaign" from Thursday through Nov. 30. The campaign aims to expand principal reductions for diligent payers and strengthen support for socially vulnerable groups, including jeonse fraud victims, youth and small-business owners.

The campaign targets holders of "subrogation bonds" — debt that arises when a tenant fails to repay a jeonse loan and the corporation steps in to pay the bank on the tenant's behalf, then seeks to recover that amount from the tenant.

Customers who have entered into an installment repayment agreement and have already paid off at least 10% of the agreed amount will receive a 25% reduction on the original principal if they repay the remaining balance in full during the campaign period. Customers who apply for debt adjustment within three years of the subrogation date are eligible for a 10% principal reduction.

The threshold for customers repaying "written-off bonds" — debt removed from the books as unrecoverable — will also be lowered. The eligibility requirement for incentives will ease from 12 months of diligent repayment to six months. The reduction rate will shift from 13% of the remaining installment balance to 20% of the original installment agreement amount. Because the base figure changes, the actual reduction will vary by individual, but the corporation said the overall scale of reductions will increase.

Support for jeonse fraud victims will also be strengthened. The corporation currently offers affected borrowers a special interest-free debt-adjustment plan of up to 20 years. Victims already making installment payments who repay their remaining balance in full during the campaign will receive a 35% principal reduction. Where a spouse or other party provided a joint guarantee to secure a higher jeonse loan limit, that joint-guarantee relationship will be immediately dissolved once the borrower repays an amount equal to the additional limit they received.

Customers with written-off bonds who qualify as youth, small-business owners or small-debt holders will receive an additional reduction of up to 30 percentage points on top of the existing principal reduction rate, raising the maximum reduction from 70% to 80%. The eligibility requirement for the 70% reduction — previously set at supporting two or more minor children — will be eased to supporting at least one minor child, including an unborn child.

Korea Housing Finance Corporation President Kim Gyeong-hwan said the campaign was designed "to help customers who are committed to repayment despite difficult economic conditions — as well as jeonse fraud victims, youth, small-business owners and other socially vulnerable groups — recover their credit standing as quickly as possible," adding that the corporation "will continue to actively pursue inclusive finance and fulfill its social responsibilities as an institution supporting financial services for ordinary people."

Inquiries can be directed to the corporation's customer center, and applications can be submitted by visiting a local branch or through its website or mobile app, Smart Housing Finance.