Research On The Legal Problems Of Chinese Mortgage-Backed Securitization

The Mortgage-Backed Securitization as a new way of handling assets and a new financing tool, is at an early stage of exploration. It is favorable for eliminating risks of bank, perfecting security institutions of Chinese capital market, fostering and strengthening the investing force of investors. It adds a new security type to security market, which is conducive to the perfection and enrichment of security categories. It is not only different from stocks and shares which are of high risks and profits, but also government bonds which are of low risks and profits. Compared with company bonds, it is less risky, but more profitable and has a higher credit rate. As a result, the combination of this kind of risk and profit included in Mortgage-Backed Securitization is appealing to the developing Chinese institution investors and individual investors. However, the Mortgage-Backed Securitization is a very complicated system and Mortgage-Backed Security is a brand-new security type in China with which Chinese investors are not quite familiar.Credit Enhancement and Rating, as a key link during the Mortgage-Backed Securitization, is of significance to improve security credit and guide investors. However, currently in practice, it conflicts with our present legal system, which has become an obstacle to the smooth development of Mortgage-Backed Securitization. This paper gives a detailed analysis of the government guarantees, insurance of commercial insurance company and the third person guarantees within exterior credit Enhancement and also over-quota guarantees and payment rank division within interior Credit Enhancement . An introduction of basic problems of credit rating is given and some problems of credit evaluation are also mentioned in this paper. For this, the author gives her personal suggestions, hoping to remove these obstacles. In addition, the author absorbs some experience of those countries with advanced Asset-Backed Securitization, in the hope of completely and systematically solving the conflict between Credit Enhancement and Rating and our legal system, impelling the law-making of Asset-Backed Securitization in China, exploiting the advantages of Mortgage-Backed Securitization, a new financial tool, to the full and consequently, promoting the development of Chinese economy.