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The Hong Kong Mortgage Corporation Limited (HKMC)

The Hong Kong Mortgage Corporation Limited (HKMC). Background information. E stablished in March 1997 W holly owned by HKSAR Government through Exchange Fund. Mission of HKMC. E nhance the stability of the banking sector R educing risks of mortgage lending of the banks

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The Hong Kong Mortgage Corporation Limited (HKMC)

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  1. The Hong Kong Mortgage Corporation Limited (HKMC)

  2. Background information • Established in March 1997 • Wholly owned by HKSAR Government through Exchange Fund

  3. Mission of HKMC • Enhance the stability of the banking sector • Reducingrisks of mortgage lending of the banks • Promote wider home ownership

  4. Content of our project • Compare development of HKMC with the mortgage-backed security markets in other nation • Recent development • Identify the difference between the two mortgage-backed securitization program

  5. Aims of our project • Understand the HKMC • Project the future mortgage development

  6. Securitization • transferring fixed income or credit assets assets (e.g. Mortgage loan) to -special purpose vehicle (“SPV”) -special purpose company (“SPC”) by financial institution (the originator). • The SPV obtains funding by issuing debt securities.

  7. Securitization • The Hong Kong securitization market started in may 1994 • Bank of America (Asia) & the assistance of Salomon Brothers Hong Kong • first public mortgage backed securitization in Hong Kong

  8. Securitization • securitization originated by the US • securitization not known by the Hong Kong people.

  9. Securitization-Australia In 1984 the Queensland state government establishes • an unprecedented secondary mortgage market in Australia. • prudential standards for securitization schemes.

  10. Securitization-Australia The Australian market mainly dominated by • <residential mortgage backed issues> The market now includes the following • credit card • consumer receivables • commercial leases

  11. Securitization-Australia • Infrastructure development • tax concessions is a temptation • The attractiveness of securitization in connection with raising finance of infrastructure financing. • SPV must -retain effective control -ownership of the facility (X>25years)

  12. Securitization-Australia • Projects should be approved by the Development Allowance Authority. • there are 7 types of eligible project: • Land transport facilities • Seaport facilities • Electricity generation facilities • Air transport facilities • Gas pipeline facilities • Water supply facilities • Sewerage or waste water facilities

  13. H.K. Vs.U.S. • U.S. Non-traditional market expands since 2003

  14. Non-traditional mortgage market Typically • Credit grades based upon on the person’s creditworthiness • Factors: credit history, debt ratio, income documentation • Categorized as A, A-, B, C, D

  15. Non-traditional mortgage market At Present, • Left to human underwriters • Use their own judgment to categorize loan by risk level

  16. Non-traditional mortgage market • Use of computerized loan-evaluation systems • Forecast the default risk dictated by each mortgage • Determine the individualized interest rates charged to each borrower

  17. The Difference betweenthe Guaranteed Mortgage-Backed Pass-Through Programme andBauhinia Mortgage-Backed Securitisation Programme

  18. Pass-Through Programme Date of Issue: Oct, 1999 The Note holder : Originating Banks Bauhinia Programme Date of Issue: Dec, 2001 The Note holder : Institutional and retail Investors Difference

  19. Pass-Through Programme The currency of issue : HK Dollar The distribution network: Through HKMC Bauhinia Programme The currency of issue: multi-currency The distribution network: Through dealer group Difference

  20. Trend and Recent Development of HKMC

  21. Recent development of HKMC Residential Mortgage Loans (including Mortgage Loans with HKMC’s Guarantee)

  22. Recent development of HKMC • HKMC has successfully issue a large number of mortgage loans to society • successfully achieve it goals

  23. Recent development of HKMC The trend and recent development of Mortgage Insurance Program

  24. Recent development of HKMC The trend and recent development of Mortgage Insurance Program

  25. Recent development of HKMC reasons • an expansion of Mortgage Insurance Program increasing maximum loan-to-value ratio to 95% • the economy in Hong Kong has become better

  26. Recent development of HKMC • The MIP has it contribution people buying houses. • The MIP is successful, already Insurance HK$ 1437757 million.

  27. Recent development of HKMC Some recent new 10-year Zero Coupon Bonds( HKMC 1001) at September 12, 2006. offered at a price of 65%

  28. Recent development of HKMC Some recent new on Oct 30, 2006 Foreign currency rating to Aa1 Local currency rating to Aaa

  29. The Hong Kong Mortgage Corporation Limited Half-year Financial Results

  30. The Hong Kong Mortgage Corporation Limited Half-year Financial Results

  31. The Hong Kong Mortgage Corporation Limited Half-year Financial Results

  32. The Hong Kong Mortgage Corporation Limited Half-year Financial Results

  33. Conclusion • HKMC is trend to be more mature • More Diversify products • Promote secondary mortgage market • Play an important role in banking sector

  34. THE END

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