On Legal Issue Of Mortgage Backed Securitization In China

Mortgage-backed securitization issue has been a hot topic of China in recent years. Mortgage-backed securitization is originated in the United States, and widely applicated and developed in the developed countries and regions of Europe and East Asia in decades. In the background of global economic integration and financial innovation wave, in March2005the central bank approved the CCB as the experimental unit of the asset securitization, which means that as the new financial practice, the securitization of housing mortgage loans has got the license. For a time, domestic banks have mortgage-backed securities plan on schedule. At the same time, the implementation of the housing mortgage loans securitization in China has a long-term meanings, which not only have broadened the financing channels of commercial banks, reducing the risk of commercial banks operating, but also brought additional profits to commercial banks, as well as played a positive role to China’s capital market development and the central bank’s macro-control.In China, the housing mortgage is still just started, the relevant legal and regulatory systems are not yet coordinated with it.Therefore, study and learn the mortgage securitization law of developed countries and regions of is the only way. Due to the different legal systems and economic systems, the existing national housing mortgage loans securitization law, has shown different characteristics. As the birthplace of the mortgage-backed securities, the relevant laws and regulations of the United States is more perfect, whose main feature is, the law allows institutional investors and mortgage are combined, as well as the three professional operated housing mortgage loans institutions supported by the Government was established. In Europe, in spite of the considerable difficulties encountered on the way of legal transplantation of asset securitization due to the different legal systems, France and other countries have worked out laws and regulations for the securitization of housing mortgage loans considering from the principle of asset securitization risk isolation. The mortgage-backed securities laws and regulations of Europe and the United States and Japan are respectively gradually formed with the background of the each different national conditions and legal systems, not developed all in a day. China must learn from their successful experiences and lessons of failure to build up its own lawful supervisee for China’s housing mortgage-backed securities, which requires considering our own historical development and the legal system. For now, there are a considerable number of legal issues in China’s implementing the mortgage-backed securities. First, the legal concepts involved in a lot of securitization of housing loans did not exist in our legal system, which creates the legal status of the housing loan securitization in China. Firstly it comes the special purpose vehicle SPV in the legal status of our country. In the United States, there are three types of the SPV, as a corporate, trust and limited partnership, whose realization in our country have different problems and the pros and cons, due to the differences between our legal system and common law with the western countries. The most big problem of it is how to select and formulate corresponding laws and regulations in the process of implementation the MBS. Second, the implementation of securitization of housing loans in our country is still out of the exploratory stage, the relevant regulatory law is not perfect. Finally, China still take the use of a separate regulatory model to regulate China’s housing mortgage loans securitization, the cross-industry financial products, which is likely to cause a lack of supervision and cross-regulatory.Facing so many heavy issues,the legal regulatory system for China’s housing mortgage loans securitization has a long way to go. We must first establish the legal status of special-purpose institutions in China. China’s current "Company Law""Trust" and "Partnership Enterprise Law" haven’t made clear for the special purpose vehicle, and immediately change these three laws is not good policy regardless of cost or effect. Therefore, learning from the foreign-related laws and combining with the legal characteristics of our own to develop new regulations for asset securitization or will meet our urgent needs, at the same time the harmonization of legislation of the model can also produce mover advantage. Secondly, with the a cautious attitude towards the mortgage-backed securities of such financial innovations, we must improve the forecasting and early warning functions of regulatory agencies to effectively control the expansion of the securitization, to strengthen the risk management of financial innovation. Once again, our sub-industry regulatory model has been existing for a long time and now the financial markets have not yet reached the degree of mixed supervision must be change, therefore,to strengthen the coordination and liaison for various regulatory agencies is the only way to solve the problem of lacking of supervision for the housing mortgage loans securitization.Finally, as our rules of information disclosure system is too general, we need to draw up detailed rules and regulations, to improve the information disclosure system, to make China’s housing mortgage-backed securities regulatory system more transparent and regular, on which way China’s housing mortgage-backed securities regulatory system can be ultimately be improved. Although the prospect is broad, the road is twists and turns. So we should fundamentally adhere to the progressive mode to establish the legislation models and regulatory models for the benign development for China’s MBS, which is our direction.