Asset Securitization Theory And Asset Securitization, Development Of Analysis

Asset securitization is the structured financing whereby the assets that lack liquidity but have stable future cash flows are packaged, underwritten and sold in the form of asset-backed securities though the technique of restructure and credit enhancement. The development of the financial market demonstrated that this new financing model was one of the most important innovations in world financial field in the decades. This article emphatically deals with the mortgage and NPL securitization in China after introduction of the asset securitization theory.Housing industry in China has entered a quick development stage, and the demand for mortgage from the households increased accordingly, which will eventually make the contradiction between "short-term" deposits and "long-term" loans of financial institutions as well as the shortage of funds stand out. One good solution to this issue is mortgage securitization using the other countries for reference. On the one hand, securitization can solve the liquidity problem and increase the capital adequacy ratio of financial institutions; On the other hand, housing industry can get more fund support from the financial institutions, which in turn the households' consumption demand can be better satisfied and is beneficial to the health development of housing industry. At the same time, it is also beneficial to the development of the capital market, particularly the bond market, by providing new investment vehicles.According to the foreign experiences and lessons, non-performing loans (NPL) is one of the most critical reasons of the financial crisis. Securitization was vastly applied in solving the NPL by other countries and fruitful results also were achieved. Securitization should be a major means in handling the NPL.