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Study On The Securitization Of Housing Mortgage Loan In China

Posted on:2006-07-23Degree:MasterType:Thesis
Country:ChinaCandidate:X R HeFull Text:PDF
GTID:2166360155954682Subject:Technical Economics and Management
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Asset Securitization is a course that converts the unnegotiable assets which owned by primitive rights person or foreseeable income into negotiable financial products which can be sold in capital market. It helps corporation realize the conversion from traditional financing method based on whole property to modern method based on individual property. The basic process of Assets Securitization is as follows: property primitive rights person determine the property that will be securitized, sell it to a special purpose vehicle (or SPV purchase it initiatively), then SPV will recategorize and combine these properties into a property pond (meanwhile these properties will obtain a certain credit level and get higher level from professional institutions), issues priced security in financial market based on cash flow from the property pond, eventually use the cash flow to imburse the principal and interest on time. Mortgage Backed Securitization is a main style of Asset Securitization. It is a process that converts the mortgage backed loan which will produce cash flow at present and in future into negotiable securities which can be sold in capital marked. As everybody knows, mortgage backed loan began in the late 60's in America. In those days, because of serious inflation and increasing interest, earning ratio of the fixed assets of financial institutions could not compensate the rising cost of short-term liability. At the same time, the savings of commercial bank were mostly withdrew, therefore the banking system were in trouble. Facing this situation, to alleviate the lack of flowing assets, government decided to establish and boost the second marked for mortgage backed loan, which created the meaningful business of Mortgage Backed Securitization. June in 1998, our country made a reform about housing regulation in urban, gradually realized housing distribution monetization, greatly speeded the housing construction and the found of housing consuming In our country, the choice of housing mortgage loan securitization mode must be adjust to the trend of whole economy system gradually reform, in the condition of complying to the principle of cost and benefit, actually embody innovation significance of housing mortgage loan securitization. According to our national situation and principle of "real sale"and "separating bankruptcy", we should choose entrust institutions as SPV. The most ordinary mortgage backed securities includes Mortgage Pass-through Securities, Mortgage Backed Bond, Pay-through Securities. Mortgage Backed Bond can be used only when we adopt inside balance sheet mode in housing mortgage loan securitization, through comparing the Mortgage Pass-through Securities and Pay-through Securities, the latter (with the representative of CMO) is the ideal operation instrument to perform housing mortgage loan securitization. Securitization of housing mortgage loan is a huge systematic project which involves several participant bodies and structuring complicated processes, so it will face many risks incurred by uncertain factors. In the view of designing plans of housing mortgage loan securitization, the securitization risks mainly demonstrate in three aspects: prepayment risk, interest rate risk and credit risk. Prepayment risk refers to a kind of uncertainty of the earnings foreseen by investors when borrower prepays the loan. Interest rate risk will happen when the bond price changes in the reverse direction for the fluctuation of interest rate. Credit risk means another kind of uncertainty for the provider of finance or services if the one who gain finance or services don't keep his words because of positive or objective reasons. This essay analyzes the factors that influence the three kinds of risk, put forwards measures to prevent from and solve the risks in order to design a perfect risk management schema of housing mortgage loan securitization. In addition to above risks, there also exists some obstructs during the course of housing mortgage loan securitization, we should adopt some measures to guarantee the smoothly executionIn our country, the choice of housing mortgage loan securitization mode must be adjust to the trend of whole economy system gradually reform, in the condition of complying to the principle of cost and benefit, actually embody innovation significance of housing mortgage loan securitization. According to our national situation and principle of "real sale"and "separating bankruptcy", we should choose entrust institutions as SPV. The most ordinary mortgage backed securities includes Mortgage Pass-through Securities, Mortgage Backed Bond, Pay-through Securities. Mortgage Backed Bond can be used only when we adopt inside balance sheet mode in housing mortgage loan securitization, through comparing the Mortgage Pass-through Securities and Pay-through Securities, the latter (with the representative of CMO) is the ideal operation instrument to perform housing mortgage loan securitization. Securitization of housing mortgage loan is a huge systematic project which involves several participant bodies and structuring complicated processes, so it will face many risks incurred by uncertain factors. In the view of designing plans of housing mortgage loan securitization, the securitization risks mainly demonstrate in three aspects: prepayment risk, interest rate risk and credit risk. Prepayment risk refers to a kind of uncertainty of the earnings foreseen by investors when borrower prepays the loan. Interest rate risk will happen when the bond price changes in the reverse direction for the fluctuation of interest rate. Credit risk means another kind of uncertainty for the provider of finance or services if the one who gain finance or services don't keep his words because of positive or objective reasons. This essay analyzes the factors that influence the three kinds of risk, put forwards measures to prevent from and solve the risks in order to design a perfect risk management schema of housing mortgage loan securitization. In addition to above risks, there also exists some obstructs during the course of housing mortgage loan securitization, we should adopt some measures to guarantee the smoothly execution...
Keywords/Search Tags:Securitization of housing mortgage loan, finance innovation, plan design, risk management
PDF Full Text Request
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