“ KHFC Aids the House Poor with Switching Conforming Loans ”

- Payment of principal postponed up to 10 years for borrowers whose income has decreased due to unemployment or other reasons

- Single home owners whose annual household income is less than KRW 60 million and whose house is valued at less than KRW 600 million and has floor space of less than 85㎡ are eligible. Switching is possible up to KRW 200 million regardless of LTV

- May apply at banks where the current loans were taken out; begins on May 31

The Korea Housing Finance Corporation (KHFC) announced on May 31 that it would launch "switching conforming loans" to adjust the debts of the house poor who are paying back their debts to the best of their ability.

This is a follow-up measure to the house poor support plan announced by the government in the "Comprehensive Measures to Normalize the Housing Market for the Housing Security of Low-income Households" on April 1. KHFC will support the house poor by switching their current loans to "conforming loans" with conditions set by KHFC and acquiring these loans for securitization.

※ Switching conforming loans are offered to the house poor who face difficulty in paying back principal and interest because their income has decreased due to unemployment or other issues. Their current mortgage loans are switched to conforming loans of which principal payment is postponed for a certain period. Then, KHFC acquires these loans to finance them by issuing MBS.

□ Payment of principal postponed up to 10 years for borrowers whose income has decreased due to unemployment or other reasons

In the switching conforming loans, a grace period, during which only interest is paid and the payment of principal is postponed, is allowed up to 10 years in case a borrower's income has decreased due to unemployment or other reasons. "It is designed to provide an opportunity for households in a difficult situation to recover while paying back interest only," said an official at KHFC.

Banks can allow borrowers to postpone the payment of principal up to two years if they are struggling to pay back principal due to a decline in their income or rising debt. The payment of principal may be postponed up to 10 years if borrowers' income decreased more than 50% and up to five years if the income fell less than 50%.

□ Single home owners whose annual household income is less than KRW 60 million and whose house has floor space of less than 85㎡ and is valued at no more than KRW 600 million are eligible. May apply at their current banks

In order to be eligible to switch to conforming loans, a borrower's annual income (combined with his/her spouse) should be less than KRW 60 million and the couple should only own a single house. Their credit rating (CB rating) should be at least 8, and the house for the loan should be worth no more than KRW 600 million and have floor space of less than 85㎡.

Also, their current mortgage loan should have lapsed at least half of the loan period or at least three years after taking out the loan. Mid/long-term loans of which the principal and interest are paid back in installments can be switched to conforming loans regardless of maturity, and short-term lumpsum payment loans can be switched to conforming loans if they are to mature within the next three months.

Once switched to conforming loans, principal and interest may be paid back in installments with the maturity set from a minimum of 10 years to up to 30 years. The applicable interest rates are announced by each participating bank.

Eligible customers who seek to switch to conforming loans need to apply at their current lending banks. However, Bogeumjari loan borrowers need to apply at KHFC.

□ May switch up to KRW 200 million regardless of LTV despite a fall in house value

One of the features of the newly launched "switching conforming loans" is the possibility for borrowers to switch up to KRW 200 million within their current loans regardless of LTV even in cases where the LTV is beyond the limit due to a fall in the house value. In order to allow this, the government revised applicable regulations to accept and apply the LTV of the earlier loans to the switching conforming loans.

□ Switching conforming loans to help improve the housing situation for low-income households and the financial market

KHFC expects that this new offer will help the house poor who are under pressure to sell their houses immediately because their loans have not been extended or are struggling to pay back principal and interests so that they may keep their houses and resolve their debts.

In addition, by switching to conforming loans, the house poor will pay interest at low, long-term, fixed rates ranging from 3.7% (10 years) to 3.9% (30 years) per annum instead of their current high interest rates. This will help increase the net income of a household as the interest burden will be reduced and without risk of fluctuation in the interest rate.

“The newly launched switching conforming loans is intended to rescue the house poor who are determined to financially support themselves and live in their own homes. KHFC continues to seek measures to support the house poor through various actions such as the pre-joining of JTYK,” said KHFC CEO Seo.