| The subprime mortgage crisis provides us with a good angle of view to look into the advantages and defects of the American mortgage loan system. Generally speaking, the real estate trade system, the individual credit collecting and appraising system and the property and loan insurance system are comparatively well-built, thus worth of learning. The mortgage loan risk of the American banking institutions has been transferred to bond investors worldwide through the process of asset securitization. The outburst of the subprime mortgage crisis is mainly attributed to the American monetary policy, the inadequacy of banking supervision during the process of the mortgage loan innovation and securitization, as well as the contradiction between the short-term rewards and long-term loan risk of banks.As regards to China, we have problems in areas including the real estate trade market, the transaction funds monitoring and the mortgage loan system. Due to the low degree of asset securitization, banking institutions still undertake the primary mortgage loan risk. What we need to do is to improve the whole system, make up the potential deficiency, and learn lessons from others.This essay includes four parts:The introductory part is to brief the background and purpose of the research: the subprime mortgage crisis overwhelmingly affects the global economy. Currently our domestic real estate market shows certain features similar to those of USA right before the financial crisis. Therefore the essay tries to compare the mortgage loan systems of China and USA, with the purpose of borrowing the experience from the subprime mortgage crisis and exploring the way to prevent domestic mortgage loan risk, healthily develop the business and maintain the stability of financial system.The first part is to analyze the functioning of the American mortgage loan system, by brief description about the classification of the mortgage loan, its legal basis and evolution, as well as the establishment of the real estate trade security system which is referred to as the notarized trust system and the foundation of the secondary mortgage market, together with the introduction of the proceedings, primary parties involved and bonds derived from the real estate loan.The second part is to summarize the effects and advantages of the American mortgage loan system. The derivative bonds constitute a prominent part of the American equity market. The large-scaled asset securitization helps to ensure sufficient funds for the banking institutions to offer real estate financing service, lower the lending interest rate, and reduce the financing cost of purchasers. The American mortgage loan system has the following advantages: 1. a well-established legal system which regulates clarified property rights; 2. the perfectly-functioned individual credit system and clear individual credit rating criteria; 3. the introduction of a third-party institution to defuse the mortgage loan risk; 4. the developed mortgage loan market which highly accelerates the liquidity of the mortgage loans while shifting the loan risk of the banking institutions; and 5. the full utilization of the financial market mechanism to realize the purpose of the national housing security.The third part is to analyze the existing deficiency of the American mortgage loan system and the contributing factors of the subprime mortgage crisis. First, although the excessive innovation of the subprime mortgage and the relevant derivatives shift a great proportion of the risk of the banking institutions, the mortgage securitization itself cannot eliminate risk, but just covers up the nature of high risk. Second, the inadequacy of banking supervision during the process of the mortgage loan, product innovation, credit rating and asset securitization accumulates the risk invisibly. Third, the high-risk-high-return short-term rewarding mechanism stimulates the sheer pursuit of profit among financial officials, ignoring the long-term risk. The basic cause of the subprime mortgage risk lies in the huge amount of surplus fund due to the loose monetary policy which provokes the excessive bank lending and shape the asset bubbles. The mutual promotion of the real estate bubbles and the mortgage securitization enhances the bubble effect.The forth part is to analyze the characteristics and problems of the Chinese mortgage loan system, beginning with a brief introduction of the current state of our domestic real estate market and mortgage loan system. Our financial policies serve as great support in regulations for the real estate industry. The characteristics of our mortgage loan system are as follows: 1. The proportion of down payment is relatively high; 2. With no individual bankruptcy system, the debtor is supposed to hold unlimited liability; 3. The commercial individual mortgage loan interest rate policy tends to be unstable; 4. A floating interest rate is preferred in the most circumstances of mortgage loans rather than a fixed interest rate; 5. With the low degree of the mortgage loan securitization, the CDS market is also not developed yet. The major problems existing in our mortgage loan system can be summarized as: the deficiency in laws and regulations, the limited sources to verify the individual information, the lack of scientific individual credit rating criteria, the blank field in the supervision of real estate sales funds, the ineffective protection over property rights and so on.At last past is to put forward suggestions for the development of our domestic mortgage loan market, with the combination of lessons learnt from the subprime mortgage crisis and the current state of the real estate market. First, the discreet practice of the monetary policy is required to prevent the asset bubbles and the excessive bank loans. Second, it is urgent to improve the real estate trade legislation, strengthen the supervision of the real estate trading funds. Third, the improvement of the credit system is necessary to offer platform for data sharing and increase the efficient sources for information verification and advance credit rating and appraising. Forth, it is essential to focus on credit risk management. As for banks putting huge amount of their asset on the loan asset, it is wise to stick to risk management and maintain adequate capital fund so as to keep stable business operation. Fifth, the financial reform and innotion should be carried on in a phased and sequenced manner with the powerful banking supervision: we shall expand the financing channels of the real estate corporations to avoid a high concentration of risks on banks and promote the extension of the mortgage loan securitization throughout commercial banks; meanwhile, it is important to notice that the basic goal of the financial development is to serve the social needs, thus the innovation of loan products and relevant derivatives should help to optimize the resource distribution by offering convenience and creating conditions for social production and exchange rather than serve as the tool of speculators. Sixth, the rewarding mechanism of commercial banks should focus on the control of long-term risks. |
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