[DigitalToday reporter Ji-young Lee] President Lee Jae-myung (이재명) said that even if loans used to buy expensive homes are restricted, regulations could be bypassed if the homes are used as collateral for business loans. He asked financial authorities to review possible improvements to the system. He also asked about the level and effectiveness of a proposal to impose an additional levy on loans related to expensive homes.

At a public debate on real estate policy held on July 23, Lee and others, including Financial Services Commission Chairman Lee Eok-won (이억원), reviewed blind spots in lending rules. The discussion focused on a macroprudential management levy proposal for expensive-home loans put forward by Kim Young-do (김영도), a senior research fellow at the Korea Institute of Finance.

Lee asked whether, although loans to buy expensive homes are effectively restricted, a purchased home can be offered as collateral for loans for other purposes.

He asked, "If the money is not for buying a home but 1 billion won, 2 billion won, or 5 billion won, 10 billion won is needed for company operating funds, wouldn't they personally put up a 10 billion won home they own as collateral?"

Kim replied, "If it is not a loan for living expenses but goes as a business loan, it can be obtained even above 100 million won."

Lee said that would mean collateral can be provided without limits when taking out a loan for company operating funds. He raised the possibility that such a structure could be used to bypass mortgage rules.

Lee said, "If they do not lend money for acquiring a home but recognise it as collateral for borrowing for another purpose, then after acquiring a home, it seems possible to bypass the rules in practice by offering it as collateral when taking out a loan under another name." He added, "This seems like something policy authorities should think about later."

Lee Eok-won replied, "We have an inspection system in place for diversion of business loans to purposes other than their intended use." He added, "We will look into it more thoroughly."

Lee reiterated, "It seems we should reconsider recognising collateral value without limits for general loans."

The discussion also covered the specific level of the macroprudential management levy. Kim previously proposed imposing an additional levy on loans related to expensive and luxury homes to curb housing demand and use the funds for purposes such as housing support.

When Lee asked, "You must have thought about whether it is what percent of the loan principal, or adding what percent to the interest," Kim replied, "The example given at the financial debate was 1 percent when it is around 1 billion won."

Kim previously gave an example at a public debate on the financial sector held on July 15. It applied different levy rates depending on housing price brackets: 0 percent for homes priced below 500 million won, 1 percent for homes priced from 500 million won to below 1.5 billion won, and 2 percent for homes priced at 1.5 billion won or more.