KHFC to Purchase Mortgage Loans worth KRW 6 Trillion from Banks

To nip the bud in the real estate driven financial crisis, Korea Housing Finance Corporation decided to purchase mortgage loans worth KRW 6 trillion from banks for securitization this year. Also, KHFC will seek measures to provide guarantee fee discounts for families with more than 3 children.

At the press conference for the 5^th anniversary of the founding of KHFC on March 3, CEO Joo-jae Lim (see picture) of KHFC said, “As the safety net of the housing finance market, we plan to focus our efforts to responding proactively to the crisis. ” He added that KHFC will proactively respond to the increasing risks concerning real estate prices due to the economic recession by way of (private) securitization of mortgage loans.  

According to Lim, KHFC plans to “securitize KRW 6 trillion worth of mortgage loans of banks by the end of this year to contribute to the stability of the financial market.” He mentioned that “while major banks are in a state of emergency in terms of managing their BIS capital adequacy ratio due to the economic recession and rising foreign exchange rate, it will be beneficial to banks to securitize the risky mortgage loans in respect to both their liquidity and the BIS ratio increase.”

KHFC is currently discussing the details of the securitization procedure with Woori Bank, SC First Bank and Citi Bank; in March and April, mortgage loans worth KRW 2.5 trillion - Woori Bank (KRW 500 billion) and SC First Bank (KRW 2 trillion) - will be securitized. 

With the securitization of KHFC’s Bogeumjari loans sold by the banks, the volume of the securitization will be KRW 10 trillion this year, which totals to about KRW 19 trillion since the launch of KHFC. This means that this year alone accounts for more than half of what has been provided to the market in the past 5 years.

As a measure to boost the birth rate and provide support for low-income households, Lim said that KHFC decided to positively review preferential guarantees for those families with more than 3 children. “When these families obtain a loan for jeonse or intermediate payments for apartment with the KHFC guarantee, their limit will be  adjusted upward while the guarantee fee will be reduced substantially,” he said.

Marking the 5^th anniversary of KHFC, Lim declared it was “the Second Phase” of the Corporation and introduced a unique management goal called “The 3·4·5 Project”.

“The 3·4·5 Project is an action plan to strengthen the status of our organization as a public entity by first, increasing the basic assets (the total of KHFC’s capital and basic assets of housing credit guarantee) to KRW 3 trillion by 2011, second, providing KRW 40 trillion of financing to low-income households annually (all Bogeumjari loans, securitization issuances and housing credit guarantees combined), and third, maintaining the guarantee and granting of credit totalling KRW 50 trillion.” He said, “With creativity and innovation, we will commit ourselves to overcoming the financial crisis and achieving our management goals.”