Research On The Risks Of Residential Mortgage-backed Product Innovation

The U.S. subprime mortgage crisis, which broke out in 2007, is a warning for the necessity and urgency of the risk management of Residential Mortgage-backed Product Innovation, of which RMBS (Residential Mortgage Backed Securitization) is one important form. However, the underlying assets of China's residential mortgage-backed securities, whose interest rate is based on the annual benchmark given by the People's Bank of China, differ from the counterparts in U.S.A. The interest rate of the residential loans in China is similar to the floating rate, while the rate of U.S. residential mortgage loans is fixed. Therefore, China's RMBS showed different characteristics. However, according to the papers which the author masters, there was little systematic theory research and empirical research on the risks of China's RMBS. Based on the background, this paper using three mainly risks of China's RMBS as the research object, trying to view from the macroscopic aspect, recognized the main factors influencing the prepayments risk, default risk and real estate market reversal risk. The paper then made regression analysis to prepayments risk and default risk, trying to provide banks of effectively risk management of RMBS on theoretical and technical basis.This article summarizes the domestic and overseas scholars' research results, which provided this variable selection and quantitative methods theoretical guidance of the empirical study. On the basis of normative analysis, the authors use the factor analysis, Logistic model, the multivariate linear regression analysis in SPSS 16.0 and Credit Portfolio View model to do empirical studies on the prepayments risk and default risk of Jianyuan 2005-1.The paper obtained the following conclusions and innovative points:First, the paper focuses on three major risks of China's RMBS, namely prepayment risk, default risk as well as the downturn risk of real estate market. Interest rate, macro economic situation, the stock market and gold market, real estate market are factors contributing to the three major risks from a macro perspective. Second, according to results, the currency factor, macroeconomic factor and the market value factor of stock are taken into the model as variables, which showed great impacts on prepayment risk. Currency factor and the market value factor of stock have negative impacts on the prepayment risk, while the macroeconomic factor has a positive influence on the borrowers' prepayment behavior.Third, interest rate factor, market expectation factor and the overall economic factor entered the default risk model as variables, which showed great impacts on default risk of RMBS in China. The greater the interest rate factor and the market expectation factor is, the greater the default risk is; meanwhile, the greater the overall economic factor is, the smaller the default risk is; and vice versa.