South Korea's financial authorities are tightening their regulations on loan extensions for multi-homeowners, specifically targeting loans for rental business operators amounting to nearly 14 trillion won. The Financial Services Commission is set to convene executives from banks and financial institutions to review the repayment structures and extension procedures for these loans, which have been typically lenient. President Lee Jae-myung has been vocal about the issues surrounding the fairness of these loan extensions, reiterating the need to reassess the financial privileges that multi-homeowners enjoy.

In terms of loan structure, normal residential mortgage loans taken by multi-homeowners usually follow a repayment period of 20 to 30 years, wherein the principal is typically settled upon maturity, thus rendering extensions impractical. Conversely, rental business loans are often initiated with a 1 to 5-year term, with annual renewals, which has allowed such loans to be extended routinely in the past. The outstanding balance for residential rental business loans within the banking sector was estimated at around 13.9 trillion won as of last year-end, signaling a significant area of focus for financial regulators amidst stricter housing policies.

The recent crackdown stems from earlier measures that have already restricted new mortgages for individual multi-homeowners and halted new loans for purchase and rental business operators that are not tied to new housing construction. Despite these regulations, existing loans have continued to be extended based on previous leniency in the checks performed by financial institutions. The Financial Services Commission’s recent emergency meetings underscore the urgency of redefining the terms surrounding these loans to ensure fair practices across the housing finance landscape in South Korea.