Twenty-two public institutions offered in-house housing loans to employees with limits and interest rates that violated government guidelines, even as the government has been tightening lending restrictions to rein in household debt.
The finding comes from an analysis by People Power Party lawmaker Song Eon-seog of data submitted by the Ministry of Economy and Finance on in-house housing loan programs at public institutions. Of the 52 public institutions that operated such programs last year, 22 — or 42.3 percent — were found to have breached government guidelines on loan limits or interest rates.
The 22 non-compliant institutions extended housing loans totaling 67.1 billion won ($45.3 million) to 1,034 employees. Total in-house housing loans across all public institutions last year came to 102 billion won.
Under current government guidelines on public institution reform, in-house loans for home purchases or rental deposits are capped at 70 million won, and interest rates must be set at or above the household lending rate published by the Bank of Korea.
Korea Housing and Urban Guarantee Corporation offered up to 200 million won for home purchases and up to 150 million won for rental deposits, both at an annual rate of 2.5 percent. Korea Real Estate Board lent up to 140 million won — twice the government cap — for both home purchases and rental deposits.
Korea Credit Guarantee Fund allowed loans of up to 210.8 million won by applying preferential conditions based on the number of children and other factors. The average loan per employee at the fund last year was about 160 million won, roughly 2.3 times the government limit.
Interest rates below the government-mandated floor were also documented. The Metropolitan Area Landfill Site Management Corporation and the Korea National Park Service charged 2 percent annually, Korea Minting and Security Printing Corporation charged 2.5 percent, and Korea Human Resources Development Service charged 2.6 percent. National Pension Service, Korea Land and Geospatial Informatix Corporation, and Korea Senior Human Resources Development Institute provided housing loans at zero interest.
Song also flagged that in-house loans, unlike bank loans, are not directly subject to the debt service ratio regulation. Employees could use in-house loans to cover housing costs and then take out additional bank loans on top of them, he said.
"Young people and ordinary citizens are giving up on their dream of homeownership because of the government's lending restrictions, yet employees at public institutions have been enjoying ultra-low-interest in-house loans while flouting government guidelines," Song said. "A double standard that imposes regulations on the public while granting privileges to public institutions cannot be tolerated."
He added that the government must immediately order corrective action against the institutions that violated the guidelines and overhaul the in-house loan system to meet the public's expectations.
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