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Board of Audit and Inspection flag. / Yonhap

An audit by the Board of Audit and Inspection has revealed that the Korea Housing & Urban Guarantee Corporation (HUG), which has posted losses for several years, poorly handled the recovery of tens of billions of won in bonds even after paying out roughly 15 trillion won in deposits on behalf of tenants. The audit also confirmed that HUG undercharged guarantee fees by misapplying the credit ratings of corporate tenants.

The Board of Audit and Inspection released the results of its "Regular Audit of HUG" on the 30th. According to the audit, when HUG issued a corporate lease guarantee for a company last year, it incorrectly applied the credit rating based on the "guarantee application date" — which was more favorable to the company — instead of the "guarantee issuance date" required under its internal regulations, resulting in about 2.77 billion won in under-collected guarantee fees.

HUG's finances have deteriorated every year since it turned to deficit in 2022, when guarantee-related incidents such as jeonse fraud surged. HUG's operating loss, which stood at 242.9 billion won in 2022, grew to 2.1924 trillion won in 2024. In particular, over the past five years, HUG paid out 15 trillion won due to guarantee incidents but has failed to recover 12 trillion won of that amount.

Project financing (PF) guarantee reviews were also poorly conducted. The audit pointed out that although PF guarantees are backed by a housing developer's future presale income and therefore require accurate review of future cash flow, HUG was found to have conducted inadequate reviews, including accepting data in which developers had arbitrarily adjusted construction payment schedules. As a result, HUG approved a combined 382 billion won in guarantees for three project sites that should have been denied.

Asset investigations into debtors from whom guarantee bonds needed to be recovered were also inadequate. When the Board of Audit and Inspection examined the status of asset investigations conducted by HUG's seven regional management centers into guarantee debtors, it found that among 9,003 subjects, 2,915 people (32.3%) had no investigation record at all. At the Seoul Northern Center, the investigation rate was only 21.6%.

In addition, HUG failed to refund guarantee fees to tenants who had duplicate enrollment in both lease guarantees and jeonse deposit guarantees, leaving about 170 million won unrefunded.

The Board of Audit and Inspection notified HUG to "analyze the problems and their causes, focusing on the corporation's key functions such as guarantee review, issuance, and bond recovery, and to devise improvement measures that the public and businesses can tangibly feel."

                                                                                                             Choi Min-jun