Prosecutors said Monday they have charged hundreds of people with swindling a combined 16 billion won ($14.7 million) from banks and a state-run company by exploiting holes in the country's housing loan program for low-income people.

The Seoul Southern District Prosecutors' Office said more than 120 people, including the suspected ring leader surnamed Seo, have been put under custody for allegedly playing a central role in the scam.

Seo alone is suspected of taking a combined 5 billion won from 2011 to 2013, prosecutors said. Nearly 160 others have been indicted without detention, and more than 100 people remain at large, they added.

South Korea offers cheap housing loans to low-income people, with the state-run Korea Housing Finance Corp. offering bailout funds that cover most of them. Those who are eligible are simply required to submit proof of employment to local banks.

Prosecutors believe the suspects created a paper company and employed those in need of cash, including the homeless, to fabricate their employment certificates and then divided the loans among ring members depending on the roles they played.

The ring members abused the fact that banks rarely verify these certificates for factual accuracy since the government guarantees at least 90 percent of the money is returned, prosecutors said.

Prosecutors believe there could be others who committed similar frauds since the Korea Housing Finance Corp. paid out more than 200 billion won last year.

Prosecutors also said they will ask the land ministry and the Korea Housing Finance Corp. to overhaul their policy to prevent similar scams. (Yonhap)