Further Control on Bank Housing Mortgage Loan

Financial Supervisory Service (FSS) assessed that housing mortgage loan is performed unreasonably and decided to intervene more intensively. So the risk rate of housing mortgage loan will be increased 50% at present to 60-50%.

FSS also advised 7 commercial banks including Woori Bank to low LTV below the average by June of the next year. LTV is a numerical value of loan divided by the mortgage amount.

On the 11th, FSS announced that according to the monitoring the management of housing mortgage loan by banks, the loan was still on increasing tendency even though the restraint policy practiced in the last month, so the succeeding policy was practiced.

The intensive policy is enforced from 11th and applied only to new3 housing mortgage loan.

Chung Sung-soon, Senior Officer for Bank Supervision of FSS spoke “To risk rate of 50% for housing mortgage loan at present will be increased to 60% if the applicant does not satisfy one of the criterion `The delay of payment` or `The ability of repayment`. If the applicant does not satisfy both of the criterion, risk rate will increase to 70%.”

Senior Officer Chung spoke “If the risk rate increases, the banks are limited for housing mortgage loan, and the loan will reduce.”

The criterion of payment delay means the applicant has an experience delaying payment of housing mortgage loan more than 30 days, the criterion of repayment ability means the debt rate of more than 250% when loan is divided by annual income.

FS also demanded 7 banks that maintain more than 67%, the average of banks to low LTV below the average by June of 2003; Woori Bank (76%), The First Bank (72.4%), Chohung Bank (71.4%), Pusa Bank (77.6%), Chunbuk Bank (74.1%), Suhyup (89%), etc.

Additionally, FSS designated 2 or 3 real estate information providers whose information on market to be used as the criterion of LTV.

FSS also prepared to manage separately the persons who borrowed several housing loan cases and to abolish the incentives given to the bank staffs getting large amount of housing mortgage loan records.

Dong-Won Kim daviskim@donga.com