april 12, 2013 (former ghlc: the government housing loan corporation) apuhf, new delhi, india...
TRANSCRIPT
![Page 1: April 12, 2013 (Former GHLC: the Government Housing Loan Corporation) APUHF, New Delhi, India International Conference on Housing : An Engine for Inclusive](https://reader038.vdocument.in/reader038/viewer/2022110116/551b90ff550346942b8b5034/html5/thumbnails/1.jpg)
April 12, 2013
(Former GHLC: the Government Housing Loan Corporation)
APUHF, New Delhi, India
International Conference on Housing : An Engine for Inclusive Growth
Session Housing Finance Post Sub-prime Ⅶ
Masahiro Kobayashi,Chief Economist, Global Market,
Survey and Research Department,
Japan Housing Finance Agency (JHF)
All Rights Reserved.
![Page 2: April 12, 2013 (Former GHLC: the Government Housing Loan Corporation) APUHF, New Delhi, India International Conference on Housing : An Engine for Inclusive](https://reader038.vdocument.in/reader038/viewer/2022110116/551b90ff550346942b8b5034/html5/thumbnails/2.jpg)
All Rights Reserved. 2
Perspectives on Responsible Lending and Sustainable Funding
Borrowers Lenders
SPVs Investors
MBS(Private Label Securities)
Irresponsible Lending
Risk Transfer
Credit Loss
Restore Underwriting Criteria - Ability to Repay Restore Investor Confidence - Risk Retention
Misalignment of Incentive Structure under “Originate to Distribute (OTD) Model”
Dodd Frank(Qualified Mortgage, QRM, etc) , FSB Principles for Sound Residential Mortgage Underwriting Practices ・・・
![Page 3: April 12, 2013 (Former GHLC: the Government Housing Loan Corporation) APUHF, New Delhi, India International Conference on Housing : An Engine for Inclusive](https://reader038.vdocument.in/reader038/viewer/2022110116/551b90ff550346942b8b5034/html5/thumbnails/3.jpg)
All Rights Reserved. 3
Outstanding Balance of MBS in the US and Japan
(Source) FRB (Source) Bank of Japan
US Japan
Private Label Securities (PLS) markets are shrinking both in the US and in Japan.
(trillion USD) (trillion JPY)
![Page 4: April 12, 2013 (Former GHLC: the Government Housing Loan Corporation) APUHF, New Delhi, India International Conference on Housing : An Engine for Inclusive](https://reader038.vdocument.in/reader038/viewer/2022110116/551b90ff550346942b8b5034/html5/thumbnails/4.jpg)
All Rights Reserved.
Challenges to Covered Bond Legislation in emerging countries
• Structural Subordination
Deposit Insurance, Senior Unsecured Debt etc.←Bail-in?
Cyprus!!!!!• Conflict with Existing Bankruptcy Protection Code
Asset Encumbrance, Bankruptcy Remoteness• Investor Confidence
Possibility of Spread Tightening• Regulatory Framework
Rationale for Preferential Treatments• Practical Designing
Type of Asset Class, Type of Issuer etc.
← ECBC Label Initiative
Further, Can Covered Bond provide 30 year+ Fixed Rate Mortgage?
←FHFA Strategic Plan in the US prefers standardized Securitization
4All Rights Reserved.
![Page 5: April 12, 2013 (Former GHLC: the Government Housing Loan Corporation) APUHF, New Delhi, India International Conference on Housing : An Engine for Inclusive](https://reader038.vdocument.in/reader038/viewer/2022110116/551b90ff550346942b8b5034/html5/thumbnails/5.jpg)
All Rights Reserved. 5
Type of Mortgage Products in the US
(Source) Freddie Mac
![Page 6: April 12, 2013 (Former GHLC: the Government Housing Loan Corporation) APUHF, New Delhi, India International Conference on Housing : An Engine for Inclusive](https://reader038.vdocument.in/reader038/viewer/2022110116/551b90ff550346942b8b5034/html5/thumbnails/6.jpg)
All Rights Reserved. 6
Type of Mortgage Products in Japan
(Source) JHF
![Page 7: April 12, 2013 (Former GHLC: the Government Housing Loan Corporation) APUHF, New Delhi, India International Conference on Housing : An Engine for Inclusive](https://reader038.vdocument.in/reader038/viewer/2022110116/551b90ff550346942b8b5034/html5/thumbnails/7.jpg)
All Rights Reserved. 7
Yield of 10 Year Government Bond of Japan
(Source) Ministry of Finance
![Page 8: April 12, 2013 (Former GHLC: the Government Housing Loan Corporation) APUHF, New Delhi, India International Conference on Housing : An Engine for Inclusive](https://reader038.vdocument.in/reader038/viewer/2022110116/551b90ff550346942b8b5034/html5/thumbnails/8.jpg)
All Rights Reserved. 8
Risks in Mortgage Lending and their interrelation
Credit Risk
Market Risk
Probability of Default
Loss Given Default
Liquidity Risk
Interest Rate Risk
Prepayment Risk
■Risk transferred to investors when securitized
■Risk transferred in PLS
■Risk retained by Agency in Agency MBS
■Fair value hedge needed by issuing MBS
■Cash flow hedge needed to avoid disintermediation
Payment Shock on ARM transmitted to default on those loans, transforming Market Risk to Credit Risk
Default – Foreclosure – Distressed Sales
Speed of prepayment affects Exposure at Defaults (EAD)
![Page 9: April 12, 2013 (Former GHLC: the Government Housing Loan Corporation) APUHF, New Delhi, India International Conference on Housing : An Engine for Inclusive](https://reader038.vdocument.in/reader038/viewer/2022110116/551b90ff550346942b8b5034/html5/thumbnails/9.jpg)
All Rights Reserved. 9
Payment Shock on 2/28 ARM
(Source) FRB
FF rate became higher at the time of interest rate reset
Origination
Reset on 2/28
![Page 10: April 12, 2013 (Former GHLC: the Government Housing Loan Corporation) APUHF, New Delhi, India International Conference on Housing : An Engine for Inclusive](https://reader038.vdocument.in/reader038/viewer/2022110116/551b90ff550346942b8b5034/html5/thumbnails/10.jpg)
All Rights Reserved. 10
Mortgage Delinquencies by Loan Type in the US
(Source) Mortgage Bankers Association
![Page 11: April 12, 2013 (Former GHLC: the Government Housing Loan Corporation) APUHF, New Delhi, India International Conference on Housing : An Engine for Inclusive](https://reader038.vdocument.in/reader038/viewer/2022110116/551b90ff550346942b8b5034/html5/thumbnails/11.jpg)
All Rights Reserved. 11
Delinquencies on subprime ARM picked up earlier than Unemployment
(Source) US Department of Labor, Mortgage Bankers Association
![Page 12: April 12, 2013 (Former GHLC: the Government Housing Loan Corporation) APUHF, New Delhi, India International Conference on Housing : An Engine for Inclusive](https://reader038.vdocument.in/reader038/viewer/2022110116/551b90ff550346942b8b5034/html5/thumbnails/12.jpg)
All Rights Reserved. 12
DTI and LTV
DTI LTV
Probability of Default Loss Given Default
Borrower’s personal ability to repay Property’s price
Recourse Non - recource
Strategic Default in the US
![Page 13: April 12, 2013 (Former GHLC: the Government Housing Loan Corporation) APUHF, New Delhi, India International Conference on Housing : An Engine for Inclusive](https://reader038.vdocument.in/reader038/viewer/2022110116/551b90ff550346942b8b5034/html5/thumbnails/13.jpg)
All Rights Reserved. 13
Strategic Default in the US
(Source) Realty Trac, Inc., Standard and Poor’s
![Page 14: April 12, 2013 (Former GHLC: the Government Housing Loan Corporation) APUHF, New Delhi, India International Conference on Housing : An Engine for Inclusive](https://reader038.vdocument.in/reader038/viewer/2022110116/551b90ff550346942b8b5034/html5/thumbnails/14.jpg)
All Rights Reserved. 14
LTV in the US
(Source) Fannie Mae
![Page 15: April 12, 2013 (Former GHLC: the Government Housing Loan Corporation) APUHF, New Delhi, India International Conference on Housing : An Engine for Inclusive](https://reader038.vdocument.in/reader038/viewer/2022110116/551b90ff550346942b8b5034/html5/thumbnails/15.jpg)
All Rights Reserved. 15
DTI and LTV in Japan
(Source) JHF
Weighted Average DTI Weighted Average LTV
(note) Only for JHF borrowers
![Page 16: April 12, 2013 (Former GHLC: the Government Housing Loan Corporation) APUHF, New Delhi, India International Conference on Housing : An Engine for Inclusive](https://reader038.vdocument.in/reader038/viewer/2022110116/551b90ff550346942b8b5034/html5/thumbnails/16.jpg)
All Rights Reserved. 16
Tightening of credit conditions when housing price is declining
(Source) FRB “Senior Loan Officer Opinion Survey on Bank Lending Practices”
![Page 17: April 12, 2013 (Former GHLC: the Government Housing Loan Corporation) APUHF, New Delhi, India International Conference on Housing : An Engine for Inclusive](https://reader038.vdocument.in/reader038/viewer/2022110116/551b90ff550346942b8b5034/html5/thumbnails/17.jpg)
These materials have been prepared for the sole purpose of providing information to our investors and not as an offer, sale or inducement to buy or sell bonds.
We urge investors when they are making investment decisions regarding bonds to carefully confirm details of the conditions, content, and structure of the final products in the latest product prospectus prepared for the issuance of the relevant bonds as well as any other most recent available information and accordingly assume personal responsibility for their decisions.
(Former the Government Housing Loan Corporation)
Thank you for your attention.