Lee Eok-won: “Relocation Loan LTV to Be Based on Cooperative Member Sale Price” — BigGo Finance

Lee Eok-won, chairman of South Korea’s Financial Services Commission, said on the 24th that the “cooperative member sale price” will serve as the standard for calculating loan-to-value (LTV) ratios on relocation loans, as part of a revamp of the assessment methodology.

Lee made the remarks during a plenary session of the National Assembly Political Affairs Committee that afternoon, responding to a question from People Power Party lawmaker Kim Jae-seop, who asked the FSC to disclose the specific criteria used in calculating LTV for relocation loans. The FSC announced a comprehensive real estate financial policy package on the 13th, revising the LTV assessment method for relocation loans to use the higher of the pre-project asset appraisal value or the post-project asset appraisal value.

When Rep. Kim pointed out that specific criteria for the “post-project asset appraisal value” are needed to avoid confusion in the field, Lee responded: “It will be based on the cooperative member sale price. Once the management and disposal plan is approved, the cooperative member sale price is determined, and that becomes the collateral value.”

Regarding the upward revision of the household loan growth target, Lee explained: “When we initially proposed 1.5%, the nominal growth rate was 4.9%, but now the economy has improved and it has reached 13%.” He added: “There is rising demand as a result, and housing transaction volume has also increased. We took these actual demand factors into account in making this adjustment—it does not mean we are unconditionally approving all loans.”

On the “Youth Future Bogeumjari Loan,” which drew criticism from opposition lawmakers that it effectively “traps” young people in non-apartment housing, Lee clarified: “Using this product does not mean losing first-time homebuyer benefits. We are simply offering an additional option.” When People Power Party lawmaker Cho Jung-hun criticized the policy, saying “it is difficult to understand a policy that gives loans to young people but prevents them from buying apartments,” Lee elaborated: “If they want to buy an apartment, the existing Bogeumjari Loan is available, and using this product does not extinguish first-time home purchase benefits. We are not eliminating or replacing the existing program.”

Controversy Over Household Loan Deregulation

Opposition lawmakers continued to criticize the easing of household loan regulations. Social Democratic Party lawmaker Han Chang-min pointed out: “There is a risk that policy finance could once again be reduced to a subordinate mechanism for real estate market stabilization, and the household debt problem could expand.” He added: “As of early August, Woori Bank has already exceeded its household loan target by more than 200%, amounting to over 1 trillion won (approximately $722.7 million). Commercial banks are significantly overshooting their targets and management is failing. We need to see clear penalties and transparent management.”

In response, Lee said: “We comprehensively reviewed the difficulties faced by genuine end-users who cannot pay their remaining balances.” He stressed: “The core principles—LTV, DSR, and loan limit regulations designed to block speculative demand—remain unchanged.” He added: “The nominal growth rate has risen significantly from 4.9% at the time targets were set to 10-13% recently, and housing transaction volume has increased following the end of the suspension on heavy capital gains taxes for multi-homeowners. We eased regulations after comprehensively assessing this market demand—we are not indiscriminately lowering the lending threshold.”

Relocation of FSC and FSS to Provincial Areas

On reports of relocating the Financial Services Commission and the Financial Supervisory Service to provincial areas, Lee was tight-lipped, saying “nothing has been finalized.” His position is that he only knows through press releases that the Ministry of Land, Infrastructure and Transport is in the process of practical preparations and gathering opinions.

Rep. Kim Jae-seop urged: “With Seoul having entered the top 8 global financial cities, relocating the FSC and FSS to provincial areas could lower that ranking. The chairman should clearly state his opposition.” Lee responded briefly: “Nothing has been finalized yet,” then added: “It appears the Ministry of Land, Infrastructure and Transport issued a press release indicating they are actually preparing. I understand they intend to gather various opinions and proceed during that process.”

When People Power Party lawmaker Park Dae-chul asked “whether a bipolar system of Seoul and Busan is appropriate as financial hubs, or whether a multipolar system including Jeonju and Naju would be more suitable,” Lee answered: “North Jeolla Province has newly applied to become a financial center. We need to consider all comprehensive factors through various criteria.”

Single-Stock Leveraged ETFs

When People Power Party lawmakers asked whether a “stress test” was conducted before introducing single-stock leveraged exchange-traded funds (ETFs), Lee responded: “We reviewed the impact by institution and by phase.” This is interpreted to mean that while a regulatory impact analysis was not conducted because single-stock leveraged products do not constitute new or strengthened regulations subject to regulatory review, the various review and evaluation procedures required for statutory amendments were carried out.