80% → A 60% reduction in the deposit guarantee limit for ‘tin houses’ with a debt ratio of over 90%

The Jeonse deposit relief loan guarantee limit for Jeonse deposits with a debt ratio of more than 90% will be reduced from 80% to 60% of the Jeonse deposit.

The purpose is to prevent tenants from signing a monthly rental contract in the first place by reducing the tenant’s deposit loan guarantee limit in the case of a house with many loans as there have been cases where leaseholders cannot return the loan. deposit due to ‘jeonse tin’, where the deposit is higher than the price of the house.

The Housing and Urban Guarantee Corporation (HUG) announced on the 17th that it had reduced the guarantee limit by 20 percentage points from the previous 80% to 60% if the debt ratio exceeds 90% of the house price from the 16th , and announced that. to commercial banks. Debt ratio is the sum of senior receivables such as mortgage loans and Jeonse deposit divided by house price.

A HUG official said, “We have reduced the incentives for global contracts for tin houses and adjusted the loan guarantee limit to stabilize the jeonse market.

If the debt ratio exceeds 90%, tenants are more likely to withdraw their deposits even if the house price falls even slightly. This can lead to a decline in the financial soundness of HUGs who opt for deposit security loan guarantees. This is because even if HUG goes through a claim process, such as returning the deposit to the tenant and putting the house up for auction, it is unlikely that the entire amount of the deposit will be returned. The amount of subrogation paid by HUG on behalf of the lessor last year was 924.1 billion won, an increase of 83.4% from the 504 billion won in 2021.

Looking at HUG’s ‘Job Guarantee Subscription Status by Debt Ratio Section’, the number of houses with a debt ratio of more than 90% among the deposit guarantee subscription records increased from 17.1% in 2018 to 18.4% in 2019, 22.4% in 2020, 26.3% in 2021, and August 2022. It has increased each year to 26.1% of the standard. Guarantee fees also increased from 6.6 billion won in 2018 to 12.6 billion won in August 2022.

The guarantee execution multiple, which indicates HUG’s financial strength, is also expected to exceed 60 times the legally guaranteed range by 2024, raising concerns about the ‘guarantee’ being undersubscribed return of rent deposit’. HUG’s warrant multiple rose from 45.6 in December 2019 to 47.4 in 2020, 49.2 in 2021, and 54.4 in 2021. The warrant multiple at the end of 2023 is expected to be 59.7.

Park Sang-hyeok, a member of the Land, Infrastructure and Transport Committee of the National Assembly, a member of the Democratic Party of Korea, recently proposed an amendment to the Housing and Urban Fund Act to expand the total limit of HUG guarantees from the current 60 times to 70 times. Rep. said. Park, “In the long term, the financial soundness of HUG should be considered, but it is necessary to find a preemptive and immediate alternative to solve the urgent problem of the corporation’s limit on the total guarantee.”