KHFC Nothing Short of Being Public Life-time Partner since Its Founding in 2004
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KHFC Nothing Short of Being Public Life-time Partner since Its Founding in 2004
The state-owned housing financial firm now issues housing credit guarantees, long-term mortgage loans, reverse mortgage and securitized bonds to complete framework for lifetime financial system

27(Tue), Jun, 2017

President Kim Jae-chun of Korea Housing Finance Corp.(Photo: KHFC)

Korea Housing Finance Corp. (KHFC) provides housing finance in Korea. It offers long-term mortgage loans; housing guarantees for individuals, such as guarantees for rental, installments, and home purchases; housing guarantees for home builders, including project finance and construction loan guarantees; and reverse mortgages for senior citizens. 

The company also issues mortgage-backed securities and student loan-backed securities using mortgage and student loans transferred from financial institutions as the underlying assets, and sells them to investors to raise capital from the bond market. Korea Housing Finance Corp. was founded in 2004 and is based in Seoul, South Korea.  

The KHFC is a public financial company established on March 1, 2004 in accordance with the Korea Housing Finance Corporation Act. The mission of the KHFC is to improve the welfare of the public and facilitate the development of the national economy by increasing the supply of reliable, long-term housing finance. It is a quasi-government organization managing funds under the Public Institution Operation Act.

The KHFC has been undertaking the issuance of housing finance credit guarantees and the securitization of mortgages by consolidating the Housing Finance Credit Guarantee Fund, established in 1987 to improve the housing situation for low income households, and Korea Mortgage corporation (KoMoCo), founded in 1999 for the securitization of mortgages. 

Beginning on July 12, 2007, KHFC launched the innovative JooTaekYeonKeum (JTYK), a reverse mortgage scheme allowing senior citizens to put up their homes as security and receive lifelong pensions.

With the offering of these latest services, the KHFC completed the framework for a lifetime financial system, ranging from housing guarantees and mortgage loans for the middle-aged, to reverse mortgages for senior citizens. Through its four major business areas-long-term mortgage loans, housing credit guarantees, reverse mortgage, and issuance of securitized bonds, the KHFC will fulfill its role, both in name and reality as lifetime financial partners.

The role of the KHFC was to change the housing finance market greatly by introducing a fixed rate mortgage loan system. 

The following objectives were sought: At first, the development of a long-term housing finance market was expected to help stabilize not only the housing finance market, but also the housing market. Most of the consumer loans that were lent in the past three years will mature this year. This could increase instability in the financial market, therefore in order to remove unstable factors half of the housing mortgage loan (135 trillion won at the end of 2002) need to be converted into long-term loans. In other words, the Korea Housing Finance Corporation by introducing MBS to develop a long-term finance market, it will help to alleviate constraints caused by short-term financings in the commercial market.

In addition, the development of a long-term housing finance market is believed to be able to increase the opportunity for middle-income households, so that they could buy their own home. These house purchasers would be able to make monthly repayments of the same principal and interest found in short-term financings for 20 years while reducing the burden of having to pay the principals in a short period (three years). In addition, repaying the principal and interest over 20-years generally increases nominal income, which spreading the burden of principals and interests over a longer period. 

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