A Research On The American Sub-prime Loan Crisis And The Housing Mortgage Loan Of China's Commercial Banks

In the Early of 21st Century,a global financial crisis has been brewing quietly. The American sub-prime loan crisis, which began in the second half of 2006, has swept the whole world in its rapid speed, and triggered a global financial crisis. The international financial crisis has hit the international financial market and posed a serious threat to the global economy stability and growth. Its impact has spread from virtual economy to real economy, from the developed countries to the developing countries. Growth of global economy has slowed sharply, and the economy of major developed countries has been already in recession. The most terrible thing is that the current financial crisis will be still in further deterioration. The international financial crisis will have a long and profound influence on the world economy.In the context of the international financial crisis, this article rests on a basis of the American sub-prime loan crisis. At first, we look back the origin and development of the American sub-prime mortgage market. Then we analyze the process of the American sub-prime loan crisis and explore its deep causes. Finally, we analyze the reference and influence of the American sub-prime loan crisis on housing mortgage loan policy of China's commercial banks.This paper is divided into six chapters. The first chapter outlines the background of choosing the article topic, related literature review, the structure, innovation and deficiency.ChapterⅡgives a detailed description of the formative condition and evolutive process of the American sub-prime loan crisis. At first, we analyze the origin and development of the American sub-prime mortgage market. Then we begin to analyze the process of the crisis in the form of four phases. In the first phase of brewing, the Federal Reserve implements loose mortgage policy when real estate market is in prosperity, so unbearable risk has been accumulated. In the second phase of transferring risks, real estate financial institutions issue ordinary MBS and CDO based on a pool of mortgage assets in the capital market, so they transfer benefits and risks to institutional investors. In the third phase of the advent of crisis, the Federal Reserve enters the cycle of increasing interest rate. Federal benchmark interest rate keeps going up, and the bubble of real estate market bubble bursts. The price of real estate continues to decline, and the default risk of buyers keeps increasing. The real estate market remains in the doldrums with the advent of the crisis signals. In the fourth phase of breaking out, increasing repayment interest rate leads to steep rise of default rate in sub-prime mortgage market. It has a terrible impact on entire capital market, and makes many institutions suffer heavy losses, including real estate financial institutions, investment banks, hedge funds and other major institutional investors. In the fifth phase of deepening, the American sub-prime loan crisis reaches one climax after another, and triggers financial crisis in the USA. Because of Domino effect, the financial crisis triggers global recession in real economy.ChapterⅢanalyzes deep causes of the American sub-prime loan crisis. First of all, the Federal Reserve implements loose monetary policy which has contributed to the property market bubble, and should be responsible for the chain of "Sub-prime Mortgage-Sub-prime Bond-Financial Crisis". This is the macroscopic cause. Afterwards, it reveals that the crisis is the inevitable outcome of American liabilities-based economic growth pattern. The USA maintained a long-term equilibrium status: low savings rate, high consumption and high investment. However, the fragile balance status is broken by the burst of the real estate bubble, resulting in the escalation of the crisis. Then, it points out that excessive financial innovation is the potential problem over the American sub-prime loan crisis. Financial innovation not only raises the efficiency of the entire financial market, but increases the uncertainty of the financial market. Finally, a lack of financial supervision is the fundamental cause of the crisis. From the view of the operation process of sub-prime mortgage crisis, a lack of supervision of credit rating agencies leads to the outbreak of this crisis eventually. From the view of the evolution of the crisis, there are gaps in the regulatory area of the sub-prime mortgage market, as well as dereliction of duty of regulators. These two factors could not escape the responsibility for the crisis.ChapterⅣanalyzes an impact of the American sub-prime loan crisis on the real estate market of China. First of all, the crisis has changed the expectation of actual Chinese buyers, from actively entering the market to holding currency to wait and see. Secondly, this crisis has an impact on the government's policy for the real estate market. Government begins to adjust fiscal policy, monetary policy and industrial policy to strengthen supervision of real estate market. Finally, the American sub-prime loan crisis affects the long-term trend of real estate market. Based on soaring house price in the past and the potential risk of real estate market, we prospect that house price will continue to slow down.ChapterⅤanalyzes the reference and enlightenment of the American sub-prime loan crisis for the housing mortgage loan policy of China's commercial banks. In the beginning, it analyzes the risk of the mortgage loan of China's commercial banks. The main risk includes the following factors. Firstly, risk from borrower. It involves problems of the credit and reimbursement ability of the borrower. Secondly, risk from the commercial banks. It involves the over-lending desire of commercial banks, the weakness of management in housing mortgage loan, the low degree of asset securitization, as well as inadequate risk provision of commercial banks'housing mortgage loan. Thirdly, risk from collateral. It involves incident risk and price risk of the collateral. Based on above analysis, it reveals the reference and enlightenment of the American sub-prime loan crisis for housing mortgage loan policy of China's commercial banks. It mainly includes the following aspects. Firstly, we must pay attention to building personal credit information system to avoid risk from borrower. Secondly, we must strengthen risk management of the housing mortgage loan. It emphasizes on strengthening the approval management of personal housing mortgage loan, caring about the price risk of collateral for a loan and using different down payment rate. Thirdly, commercial banks should speed up the process of mortgage backed securitization. Looking back on the history of asset securitization in China, we find it is necessary to speed up the process of mortgage backed securitization. Finally, we must pay attention to financial supervision. It mainly includes three factors: adjusting supervision idea, improving the supervision system, strengthening supervision on financial innovation and international corporation of financial supervision.ChapterⅥgives the conclusion of previous five chapters. Based on above analysis, this chapter summarizes the evolution and causes of the American sub-prime loan crisis, the impact on real estate market of China, and the reference and enlightenment of the American sub-prime loan crisis for housing mortgage loan policy of China's commercial banks in order to understand the American sub-prime loan crisis deeply.