Study Of The Housing Mortgage Loans’ Risk In Commercial Banks Of China

In recent years, with the rising of the proportion of housing mortgage loans in total loans, the corresponding financial risk also increases. Especially with the continuing introduction of regulatory policies in real estates, the housing mortgage loan has new risks. In addition, Since 2014,the housing prices geneally has declined and the “Run away ” events of boss of real estates frequently has occurred which put forward higher requirements to the loan risk management of commercial banks. Because the real estate loan business rised late in China and the management level in this field is low, the author has started this research and hoped to make a modest contribution in the field.According to the practical experience,the research finds that the risks of housing loans include credit risk and operational risk in micro-level, while the risks of housing loans include market risk and bubble risk in macro-level. So this paper will disucuss the four kinds of risk from theoretical and empirical level.The paper defines the risk of mortgage loan and segmentation of it and elaborates the difference and relation among the four kinds of risk. Then the micro-level and macro-level theory basis of the risks has been elaborated.In the micro-level, the theoretical basis of credit risk and operational risk is information economics, while in the macro-level, the theoretical basis of market risk and bubble risk is LTV theory and Minsky’s financial instability theory. After that,this paper carries the theoretical analysis based on characters of the risks. The result shows that in the dynamic game between commercial bank and borrower, the judgement on the default rate is the key of the game, the Pareto optimal incentive is that the agent who takes overall operational risk by the principal agent theory, the declining of house price has the obvious character of Minsky’s bubble.The aim of empirical analysis is to solute the problem of risk management in mortgage loan and raise the correspondence plan. The questionnaire survey involves section of real estate department in ICBC,ABC,BOC,CCB,BCM,CITIC,SPDB,CMB,HXB,PSBC and 30 senior customer managers. The survey result shows that in the aspect of credit risk, the identification of risk is absent of comprehensiveness and systematicness: the current main method—scoring card have the disadvantage in strong subjective factors and unpopularity,in the aspect of market risk, the commercial bank draws the passive reply strategy and the effect for customer manager in the loans of real estate is the declining of credit line, in the aspect of operational risk, the human resource is the key factor and banks have not taken a quantitative analysis in the contribution of different posts for the operational risk which leads that it is difficult to forecast the operational risk and build up the scientific reward and punishment system to solve the principal-agent problem,in the aspect of bubble risk,the related research is seldom because the commercial banks have not gone through it. At the same time, the implement of risk transferring by assets securitization is not successful and this paper will analysis it solely.According to clean up the questions, the research train of thinking is to build up the indexes system and quantitative analysis and then bring up some countermeasures. The specific content is as follow: the credit risk can be divided into three categories, namely: forced default risk, rational default risk and malicious default risk and select out ten indictors to reflect the three kinds of risks, including occupation, education, marital status, family income, age and so on, to build up the credit risk index system.After that, the default ratio distribution in different indexes can be obatained by classification statistics method. However, the limit of this method is that the result is marginal probability and can’t catch the main contradictions and assess the risks with the related indexes.In order to solve this problem,the decision tree method will be applied by using R language. The result of empirical analysis is that The important factors which affect the default ratio of real estate loan are down payment, occupation, age and family income. This paper also finds the characters whose groups have the max and min default risk by the path of decision tree.Market risk can be divided into two parts: the one is to research the quantitative relationship between the interest rate of housing and default ratio under three circumstances by Wilson’s pressure test model, the other is to design the financial products which has the function of risk mitigation in tightening the credit line.Operational risk has the character that the risk sources are numberous. Firstly, fifteen factors which lead to the operational risks have been found in related posts and measurement index –error rate and related data has obtained. Then through the analysis of multicollinearity,the number of factors reduces from fifteen to eleven. After that, SOM model is applied to the discretization of error rate and the rough set method is applied to select six KDIs. Based on the result, the distribution of weights can be decided by AHP and coefficient of variation. Finally, the prewarning mechanism has been designed with BP neural network model, the salary incentive mechanism has been designed according to combination of weights and the analytical from the principal-agent theory, and the quantitative plan which the commercial bank and insurance company coordinate in insurance product on mortgage loan has been put up.As for bubble risk, the result shows that the decline of China’s housing price will decline not fast but gradually. Based on the Wilson’s model,the process of declining of housing price can be divided into three stages: early, middle and late stages. Among them, when it is early stage, the CLTV(the current loan to value ratio) is less than or equal to 100%, namely the mortgage balance is less than or equal to the price and the most significant risk of housing mortgage loans is credit risk. When it is middle stage, the CLTV is between 100%-120%, namely the mortgage balance is larger than the price, but the real estate is not collapse, the most significant risk is the market risk. When it is late stage, the CLTV(the current loan to value ratio) is larger than 120%, the real estate has collapsed, the credit risk and operational risk is the most significant. And then combined with the Engel coefficient of our country, the CLTV and CDSR(current income debt service coverage ratio) can become the prewarning indexes in China’s house prices falling stage. It fills up the blank of many commercial banks to controlling the risk of bubbles in a certain extent.In order to realizing the risk transferring effects through asset securitization this paper proposed issue of securitization of housing mortgage loan products in the inter-bank bond market and the introduction of foreign investors The specific idea is the investment period of asset securitization product is long, while most domestic investors hold short-term assets.Therefore, the introduction of overseas investors is necessary. This paper shows that the inter-bank bond market is more easily accepted by overseas investors to accept, so the mortgage asset securitization product promotion plan should be designed according to the characteristics of overseas investors preference and the particularity of domestic mortgage loans. This paper designed the scheme, including:(1) the basic structure of the transaction mortgage asset securitization products;(2) how to introduce foreign investors(3) how to carry out the construction of housing mortgage loan securitization products market. The structure of the transaction is described by the flow chart. The introduction of overseas investors is designed by "three step" strategy according to their preferences. In the market construction stage, the construction of the risk isolation mode, market information disclosure system construction, credit system construction should designed by stages, which can be summarized as "a guide and three building". Among them, in the aspect of the risk of isolation,this paper shows that how to transform from "in balance-sheet pattern" to "off balance-sheet pattern"; in the aspect of information disclosure, this paper shows that how to transform from the "general information" to "full disclosure", in the aspect of credit system construction, this paper shows that how to classify from the traditional guarantee and priority inferior to the introduction of CRMA(risk mitigation) and CRMW(risk mitigation instruments).The possible innovations of this paper include: Firstly, the credit, market, operation and bubble risk from mortgage loans are analysed from the comprehensive angle, while the previous researches focus on a single risk. Secondly, in the study of the credit risk of housing mortgage loans, the use of R language programming, decision tree analysis using data mining method to evaluate the credit risk of housing mortgage loans and put forward the corresponding risk control measures according to the evaluation results. Thirdly, in the study of housing mortgage loan market risk, in order to prevent "the tightening of credit risk", this paper designs a risk mitigation of financial products to deal with it. Fourthly, in the study of housing mortgage loan risk, the "errors" data is discretized by competitive neural network model in the MATLAB environment, using rough set theory and through the empirical analysis, six key risk indicators from the fifteen mortgage operation risk factors are selected. Then through the AHP and the coefficient of variation of the combination weighting method, risk weights for the six key risk indicators are obtained. On basis of the result, BP neural network model has been used as the early warning mechanism and the design of the salary system based on principal agent theory to controlling the operational risk. At the same time, the insurance product is designed to controlling it. Fifthly, based on the pressure test on China’s real estate mortgage loans by Wilson’s and by analyzing the CLTV and CDSR, the order and progress of three risks outbreaking can be obtained. Sixly, According to the physical truth of China’s bond market and considering the use of asset securitization in transferring the risk of mortgage loans, the plan named as "a guide and three building" is put up, which include how to introduction the oversea investors,how to build the risk isolation system, namely from "in balance-sheet pattern" to "off balance-sheet pattern " how to build the information disclosure system by stages, how to enhance the credit system, namely from the traditional guarantee and priority inferior to the introduction of CRMA and CRMW.