Assets accompany with a cash flow good deal be securitized so mortgage gives ar undertaken into securitization by the HKMC to distribute risks and divulge the secondary mortgage market in Hong Kong , which is called mortgage-backed securities(MBSs), secured by a pool of mortgage loans. Through the sercuritization of mortgage loans some advantages be generated to financial markets . In hong kong , the mortgage are mainly residentail properties collateral. collectable to the benefits of MBSs and the demand to develop secondary mortgage market , weigh securitization leave keep growing in hong kong .
mortgage-backed securities(MBS)
Mortgage-backed securities is an asset-backed security. The assets are residential properties and issued by HKMC. The monthly repayment of principal and interest from homeowners will pass through to MBSs holders through banks . The MBSs are guaranteed by HKMC to appropriate whilely payment of principal and interest .HKMC will prototypal buy a pool of mortgage loans from clear sellers(banks) and because change them into the mortgages-backed securities(MBS) through Special Purpose Company (SPC) which not affected by brankrucpt . MBS will then resell to approved sellers. MBS is popular by investors due to the special features of MBS.
Advantages of securitization
Some of the risks go with by mortgage loan can be cut back by securitization , that is why securitization is taken place. Some of the advantages of securities are evaluated below.
Liquidity
Mortgage loan is no a liquidity asset , since the loan maturity can be as long as 30 years. Security is marketable and highly degree of transferability so is a more liquidity asset .And the liquidity can also reduce risks that may occur during the long time marturity.
Credit Enhancement
MBSs are gauranteed by HKMC , with a lower risk-weighting equalise with mortgage loans . And the timely repayment of principal and interest are also guaranteed by HKMC .
Risks of MBS
Interest Rate risk...If you want to notice a full essay, order it on our website: Orderessay
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