HF expands principal reduction for HF guaranteed loan borrowers 

- HF offers an up to 70% reduction in principal payment for borrowers with distressed HF guaranteed mortgage loans over the last 12 months or more  

- Principal reduction will be tentatively available until the end of 2023 to support distressed borrowers hit by COVID-19

According to Korea Housing Finance Corporation (HF, CEO Choi Joon Woo), loan modifications will become much easier for HF-guaranteed jeonse deposit and interim installment payment loan borrowers whose distressed loans have been repaid by HF. 

HF announced on June 02, 2022, that it will tentatively ease loan modification requirements through the end of next year as part of its effort to relieve the repayment burden of distressed borrowers with non-performing HF-guaranteed loans (jeonse deposit or interim installment payment) whose repayment has been made by HF. 

Principal reduction has been available only to written-off debts* so far. However, an up to 70% reduction in principal will be offered for non-written-off debts that have been non-performing and thus repaid by HF over the last 12 months or more (up to 30% reduction in principal for distressed debts repaid by HF for six months or more but less than 12 months).

* Written-off debt: A non-performing loan unlikely to be recovered and consequently written off from the balance sheet (not giving up the right to collect the loan). Independently of the accounting treatment, collection activities can be performed on the loan until the statute of limitations is up. 

This easing of the requirements is part of the government’s initiative from last year entitled “Stronger Support Measures for Credit Recovery on Guaranteed Loans.”* This aims to help the self-employed and other vulnerable groups who have defaulted on their loans for a long time due to circumstances like COVID-19 swiftly consolidate their loans to the extent of their repayment capacity. 

*“Agreement on Stronger Support Measures for Credit Recovery on Guaranteed Loans to Help the Self-Employed and Low- and Moderate-Income Groups Recover,” Financial Services Commission (December 2021)

In addition, HF will prevent moral hazard through a rigorous candidate screening process that includes income and asset verification. This principal reduction will be tentatively available until the end of 2023. 

HF CEO Choi commented, “As non-performing HF-guaranteed loans can be consolidated only when HF makes repayments, their consolidation has been possible at a later date compared to other loans. To support distressed borrowers to quickly get back on their feet, we have come up with this measure. HF will continue to offer various support measures for those facing financial difficulties due to circumstances like COVID-19.” 

For a loan modification application for principal reduction, please visit a nearby HF branch or submit a contact-free application  at HF’s official webpage (www.hf.go.kr) or mobile application (Smart Home Pension).