The Research Of Mortgage-Backed Securitization In China

Since 1970s, the Mortgage-backed Securitization (MBS for short) has been one of the most important financial innovations, and been adopted by more and more countries. This new tool changed the traditional indirect financing to direct financing. On Dec 15th, 2005, People's Bank of China approved China Construction Bank as the pilot of securitization of house mortgage loans to issue "Jian Yuan"MBS in inter-bank bond market. As the originator, China Construction Bank consigned CITIC Trust & Investment Co., Ltd to issue MBS of RMB3.17 billion.However, when MBS disperses bank's risk to investors, it also has brought the new risks. The most prominent one is the prepay risk, because it can affect directly the stability of securitization product's cash class. Therefore this paper mainly analyzes the risk size and determining factors. Firstly, utilizing static model of prepayment and the data the CITIC Trust announced, calculates actual prepay rate, which indicates that there is very big disparity between the real prepay rate and China Construction Bank initial estimated value. Afterwards, this paper discovers three factors: individual home mortgage rate, the growth rate of the inhabitant incomes, and the house price index, to explain the prepay rate. By utilizing regression analysis method, this article determines the correlative relationship between them and the prepay rate.