S. Korea to further curb nonbank mortgages

SEOUL, Oct. 8 (Yonhap) -- South Korea plans to stiffen regulations on mortgage
lending by nonbank financial institutions as part of efforts to curb rising
housing prices, the financial watchdog said Thursday.
The move, which goes into effect Monday and follows the regulator's recent
decisions on bank mortgages, comes amid growing concerns that a surge in
home-backed loans could result in an upward spiral of housing prices.
"The watchdog will advise nonbank financial firms including insurers and mutual
savings banks to beef up their risk management of home-backed lending," the
Financial Supervisory Service (FSS) said in a statement.
The FSS said it will expand the application of its regulations on mortgage loans
by the nonbank sector into non-speculative zones in Seoul and the capital's
adjacent areas.
Amid record-low borrowing costs and signs of an economic recovery, demand for
mortgage lending rose in expectation of further gains in housing prices.
In early July, the watchdog toughened regulations on bank mortgage lending by
allowing lenders to extend loans amounting to up to just 50 percent of the value
of a residence in Seoul and its adjacent areas, down from 60 percent. In
September, the watchdog further stiffened rules on home loans by prompting banks
to make loans based on borrowers' income.
In a bid to curb soaring housing prices in 2006, the government strengthened
regulations on home-backed lending and imposed heavy taxes on multiple home
owners. At that time, people were scurrying to secure such loans from the
non-banking sector.
sooyeon@yna.co.kr
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