Watchdog may stiffen home-backed loan rules for non-banking firms

SEOUL, July 7 (Yonhap) -- South Korea's financial watchdog said Tuesday it is
considering toughening regulations on home-backed loans extended by non-banking
institutions in a bid to stem a possible overheating of the housing market.
The Financial Supervisory Service (FSS) said Monday it will strengthen rules for
mortgage lending provided by local banks in an effort to prevent a sharp rise in
such loans from denting their financial health.
"As regulations on bank mortgage lending are toughened, there is a possibility
that people may rush to non-banking financial institutions," a senior official at
the FSS said. "The watchdog plans to scrutinize home-backed lending practices by
insurers and other financial firms."
Starting Tuesday, the watchdog will allow local banks to extend mortgage lending
amounting to up to 50 percent of the value of a residence in Seoul and its
adjacent areas, down from the current 60 percent. The new regulation will be
applied to owners of a home whose value is more than 600 million won
(US$472,255), it added.
In a bid to curb soaring housing prices in 2006, the government strengthened
regulations on home-backed lending and imposed heavy taxes on multiple home
owners. At that time, people were scurrying to borrow such loans from the
non-banking sector.
Outstanding mortgage loans extended by non-banking financial firms stood at 78.4
trillion won as of the end of June, up 700 billion won from the previous month,
according to the watchdog. The figure has been on an upward trend since March
when such lending rose 100 billion won, it added.
sooyeon@yna.co.kr
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