The Credit Risk Prevention Of China's Mortgage-backed Securitization Under Subprime Crisis

Mortgage-backed Secretions as a structural derivative financial product has been developing rapidly in today's international financial market. Following with the developments of financial market and the deepening of our banking reforms, China's mortgage-backed securities, which are still at a low level at present, will be bound to become an important way to increase liquidity and transfer risk for commercial banks. Nowadays, Housing mortgage is considered as high-quality loan by Chinese commercial banks and the bond issued on basis of such asset is also favored by investors due to its low default and stable incomes. The subprime crisis broke out in 2007 demonstrated to us the credit risks'harmful effects of asset-backed securities on the international financial market. And such effects are still continuing. Therefore, it has extremely important practical significance to study how to prevent the credit risks in our China's securitization during this period.This paper firstly introduces the background and significance of the title. Then the author elaborated the mortgage securitization's basic principles and the mechanism of credit risk. After that, it analyses the influences of the changes in the macroeconomic environment, the extent of improving the social credit system and the quality of the basic assets to the mortgage securitization of credit risks, on the basis of which it induces the warning indicators applying to reflect mortgage securitization's credit risks with the applying to KMV credit risk measurement model. And then with such warning indicators, the paper makes more in-depth analysis on the evolution of credit risk in U.S. subprime crisis. Following, the author pointed out that compared with the characteristics of U.S. subprime crisis, China's credit risk of mortgage-backed securities is still in its potential stage, but have had the sign of entering the phase of expansion with the changes in the external environment and institutional deficiencies. Further based on jianyuan2005-1, we find there is a slight decline in China's mortgage-backed securities'default risk relative to 2005, but it is likely to trigger larger growth in default probability if the house price falls further. At last this paper puts forward to some suggestion and advice to prevent the mortgage securitization's credit risks from improving the identification mechanisms, control mechanisms and publicity mechanism of mortgage securitization credit risk.