The Research Of The Housing Mortagate-Backed Securitization Legal System

Asset-Backed Securitization (ABS), a combination of the technologies in both derivative securities and financial engineering, began to rise in the United States in 1970s, and the 1990s has seen the trend of its rapid development. As a kind of financial innovation, ABS refers to a process which transforms the asset lack of flow ability but capable to produce stable currency stream into securities that can be sold and circulated with stable income through some certain structural arrangements which separate and restructure the risk and earning within the asset. To some extent, ABS is the result of financial innovation made in search of legal loopholes by the parties in order to achieve benefit maximization. The most important and basic form of ABS, Mortgage-Backed Securitization (MBS), refers to such financial institutions as commercial banks'behavior of transferring the holding of housing mortgage loan claim to a special professional institution (securitizer), which issues securities (primarily housing mortgage loan bond) in the capital market on the basis of its purchased housing mortgage loan.ABS is a kind of financial innovation, which involves the operation of securities, guarantee, non-bank financial business, etc. Owing to its complicated operation, huge financial risks may exist if there is no sound legal system to adjust the intricate legal relationship among the related parties and ensure the favorable operation of all links. In April 2007, the U.S. New Century Financial Company applied for bankruptcy, marking the outbreak of U.S. subprime mortgage crisis; later in September 2008, Lehman Brothers announced its claim of bankruptcy, marking the outbreak of the global financial crisis, which has had serious impact on the global economy. The direct inducement of this financial crisis is U.S. subprime mortgage loans, i.e.U.S.financial institutions granted a large number of housing loans to those who had no credit or no regular source of income, and then turned such loans into bonds and sold them to the investors, and finally made those bonds into financial derivatives for hedge transactions. The market size of subprime bond derivative contract access to financial market trading was magnified to nearly 400 trillion dollars, as much as 7 times the global GDP. American people's actual housing needs and purchasing power could no longer support such high price, thus hundreds of thousands of low-income class stopped paying for months when the price was falling. Logically speaking,-the off-supply should only affect a small number of investors having purchased subprime mortgage bonds. which whereas affected the whole world due to the "butterfly effect" of speculative trading on derivatives. Those investors who have made speculative trading on the derivatives of subprime mortgage bonds and tried to get large profits have suffered heavy losses, and the 156-year-old Lehman Brothers is their typical representative. The tool of MBS, originally used to spread and manage risks, and improve operational efficiency of housing market, has become the fuse of this global financial crisis. What's the reason for such a role reversal? Although this global financial crisis has had a great impact on China's economy, it hurt little our financial system. One reason is that China's capital account has not been completely opened, which has isolated the risks. But under the background of economic globalization, openness is still the trend, and also securitization is the mainstream of development. What inspiration can we get from this financial crisis? How can the legal system of mortgage-backed securitization in China be developed and improved?This dissertation has explored the relevant legal system of the development and improvement of MBS in China. The first part has explained some relevant background, basic concepts, characteristics, and economic function of ABS and MBS, etc. The second part has analyzed the inspiration of this global financial crisis on the mortgage-backed securitization in China on the basis of introducing the operating modes, legal norms and legal systems of ABS and MBS in western countries (the United States and Europe). The third part has focused on the development status and countermeasures of MBS in China, and put forward the corresponding measures. The final part is the conclusion, or the overview of the whole dissertation, which has proposed the content design of the legal system of MBS in China, and its two implements, i.e. solely state-owned company or trust.