China's Housing Mortgage-backed Securities And Risk Control

Mortgage-backed securitization as one of the most important international financial innovations in recent decades, it can turn the mortgage investment which lack liquidity but can generate predictable cash flows of housing assets into securities that can flow easily in the financial markets, so it could be not only enhancing the liquidity of assets,improving the utilization of funds,raising the risk-resisting ability of the commercial banks, but also providing new varieties of the securities and making investors having more choices.Now China has set the pilot of the mortgage-backed securitization. December 15,2005, China Construction Bank issued the mortgage-backed security which is the first products in China, and it makes the study of the mortgage-backed securitization in our country from theory to practice. It has great significance of China's economy. The U. S. subprime mortgage crisis triggered a global financial crisis in April 2007 and Dubai crisis in November 2009 are caused by the risks of mortgage-backed securities. So we should be happy for the benefits of the securitization, but pay attention to the risks involved at the same time. How to develop mortgage-backed securities while avoiding or distributing the risk is the major problem currently in our country. There will be a detailed description of prepayment ris,default risk,interest rate risk and the risk of legal policy.First this paper introduces the background of the topics,the theoretical and practical significance of the study, then presents my own research ideas,structural arrangements and research methods with the study of our country or abroad. Then introduces the principles,main participator and operational procedures in the mortgage-backed securitization. There is also an analysis of our pilot securitization products "Jianyuan 2005-1", and proposes the problems with MBS of China's development and some corresponding recommendations. And then, there is an analysis of the risks during the securitization process. This paper divides the risks into internal risk and external risks and analyzes them by using Analytic Hierarchy Process. Analytic Hierarchy Process provides a strong support for the risk analysis. According to a major degree of the risks, the paper get 4 kinds of the risks that are more influential, including two internal and two external risks. At last, some practical solutions and recommendations are proposed especially for the solution of the four major risks in mortgage-backed securitization process according to China's national conditions.