Measures to relieve debt burden of the “house-poor”

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Have you ever heard about the “house poor”? For Koreans, owning their own house is life-time dream so many people borrow mortgage loans to buy their house, sometimes beyond their means. As a result, people have their own house but they also have excessive debt payment burdens. Moreover, as the supply in housing market increases, the supply exceeds the demand in housing market. Naturally, the excess supply lowers the prices of the houses and the people who buy the house with a loan suffer from the double torture of debt payment and loss from falling price. In order to solve such a problem, the government has done various systems but for all this, the price of house is decreasing continually and there is need of more effective solutions for “house poor”. Then, let’s see about measure for the “house poor” with some examples.

housing_market

★ Mr. Han is a salary man and he bought the house 3 years ago with lending money from the bank. The price, however, has dropped sharply and he cannot repay even the interest of the loan. So, he tried to find the way to receive loans. While searching many programs for the defaulter, he got to know about ‘Free Workout’ and ‘Individual Workout’ and he thought he can be relieved with these programs. Unlike his expectations, however, Free Workout and Individual Workout are intended for private debt rescheduling, so he couldn’t get relief from them. Then, how Mr. Han could be relieved?

->  For this, the FSS encourages financial companies to expand their debt-restructuring programs.  To help more mortgage loan borrowers benefit from debt restructuring programs,  the FSS will push forward the improvement of system like exclusion of application of LTV regulation. Also, the FSS will extend the range of benefit of workout programs such as the Credit Counseling and Recovery Service.

mortgage

★ The couple in their fifties, Mr. Kim and Mrs. Choi, is worrying about their aged preparation. The only asset they have is the house and only few years ago they thought they could prepare their old age with it. Recently, however, the price of house is getting lower and yet there is debt payment burden for the loan which they got when they bought the house. They only recently got to know about Housing Reverse Mortgage but the age at entry is from 60-year-old, so they cannot join the mortgage. How do they prepare their later years?

⇒ I think you don’t need to worry about your old age. For the people who don’t have enough economic ability to live an ordinary life because of housing mortgage loan, the FSS plans to lower the age at entry of Housing Reverse Mortgage from 60 years old to 50 years old. But add to it, people who want to join this Mortgage earlier should obtain qualification of house prices of under the 0.6 billion won, single residence owner, and fact of residence. From this, ‘House Poor’ can get lump sum of Mortgage pension and repay their debt. For this, the limit of withdraw will temporarily be extended from 50% to 100% at a time for a year.

In addition to it, Korea Asset Management Corporation (KAMCO) and Housing Finance Corporation will adjust a debt by purchasing mortgage bond. More specific, KAMCO will aim the delinquent payment of more than 3 months and Housing Finance Corporation will issue mortgage-backed securities (MBS). These kinds of solution for ‘House Poor’ are the counterevidence that shows the importance of family financial stability in Korea. The economy is like organisms, so all the behaviors or conducts of each economic subject. So, the cooperation among related subject is the most important thing in solving the ‘house poor’ problem.

By Han Soyeon (pabo111@hanmail.net)

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