How To Make A Choice On MBS Mode In China

Since the first case of mortgage-backed securities, which was born in USA in 1968, mortgage-backed securitization (MBS) has got rapid development in the following years and MBS became one of the most important financial instruments in many countries. These countries, by taking advantages of MBS, innovated their housing scheme and financial system in order to get their housing financial framework enhanced. According to different functions of the government, MBS could be categorized into 3 main types: Government-dominated mode, Mixed mode and Market-centered mode.There are more than ten years of theoretical discussion on MBS in China. The discussion include USA MBS development, assets securitization modes, MBS legal issue, MBS SPV mode, comparison between inter or out of statement of MBS mode etc. However, few deeper researches have been done in terms of choice on MBS patterns, which exemplified by the problems demonstrated in the trial use of MBS initiated by China Construction Bank in 2005. Innovations of this paper include: the author, based on tremendous analysis and reorganization of the relative materials, illustrated her own arguments and suggestions. This analysis started from the common practices in other countries, covered the current situation of financial system and mortgage secondary market. At the same time, the author indicated her preference on Government-dominated mode, and recommended to implement in China. This conclusion resulted from processing of the graph and data by means of comparison, synthesis, induction, deduction according to graph and data. The author did hope that my research would provide instructions and suggestions for further development of China MBS. During her research, she accomplished < China Commercial Bank MBS—Motives, Status and Main Problems> which got published in ,2007(2).Main characteristics of this paper are: firstly, rich information collected and adequately supported the author's analysis on MBS's status quo,risks of commercial banks, different modes of MBS and its application. With plenty information obtained, commercial banks are prone to experience more successful practice on MBS in China. Secondly, tremendous charts applied in this paper and it does help the readers to gain better understanding of MBS procedure. It's not difficult to find graphic charts and tables in the mainchapters; for instance, the author inserted a lot of charts to enhance the illustration of MBS in US, Canadian MBS procedure and financial system of China. Thirdly, real case demonstrated to reinforce the author's argument that government-dominated mode should be adopted in China. Through the case that China Construction Bank conducted an experimental unit of MBS in China, the author demonstrated MBS's content, characteristics and main problems generated.There are totally four chapter of this paper.Chapter 1: Introduction. This chapter expounded MBS in US, Europe, the United Kingdom, Canada and HK. Based on MBS's development in these countries and regions, the author tried to build the readers a basic understanding of MBS.Chapter 2: Main types of MBS. In this chapter, the author analyzed the main three modes of MBS, including government-dominated mode represented by US, Mixed mode represented by Canada and Market-centered mode represented by Australia. By analyzing the different modes of MBS and its procedure, relevant system, market environment and effect, the author hopes to set solid foundation for the subsequent argument, specifically MBS choice of China.Chapter 3: China's choice on MBS. First section of this chapter compared the above 3 modes of MBS and draw the elementary conclusion that government-dominated mode should fit China. Section 2 and 3 then listed the main reason of China's choice; these reasons are presented through different angles including original intention of China, real conditions, guidelines and principles etc. Section 4 strengthened the author's argument that government-dominated mode has more feasibility with the case related to China Construction Bank.Chapter 4: Suggestions on the construction of MBS in China. Section 1 presented the author's suggestion supported by the analysis of second-tier mortgage in China. Section 2, from legal viewpoint, touched upon the revision and upgrade of related law and documents. As per the author, contents pertinent to mortgage transferring, pertain guarantee authority transferring, SPV and issuing of MBS demand a fresh legal explanation and supplementation. Section 3 put forward the proposal that more incentivetaxation policy should be applied to the main bodies of MBS, including founder-members, SPV and investors, by which the author believe that MBS could gain momentum in its development.