Transcript スライド 1 - APUHF

Asia Pacific Union for Housing Finance
January 31, 2012, New Delhi
International Conference on “Growth with Stability in Affordable Housing Markets”
during January 29-31, 2012 at Hotel Imperial, Janpath, New Delhi
Technical Session VII:
Securitization and Secondary Mortgage Market
Masahiro Kobayashi,
Chief Economist, Global Market,
Incorporated Administrative Agency
Japan Housing Finance Agency (JHF)
(Former GHLC: the Government Housing Loan Corporation)
All Rights Reserved.
Perspectives
•
•
•
•
•
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Financial Stability
Consumer Protection
Investor Confidence
Role of Government
Historical and/or Geographical Background
Implication for Pro-Poor Housing
etc.
1
Outstanding Residential Mortgage Debt and Type of Funding (as of 2010)
Trillion
USD
PLS = Private Label Securities
(Note) No PLS statistics available in Japan
(Source) EMF, ECBC, AFME, FRB, JHF
(Currency Conversion Rate)
87.7817
1.3261
(USD/JPY)
(Euro/USD)
All Rights Reserved.
2
Growth of Residential Mortgage Debt Outstanding
【Y/Y change】
【Index (Dec 2000=100)】
(Source) EMF, FRB, JHF
(Source) EMF, FRB, JHF
All Rights Reserved.
3
Home Price Index (2000=100)
(Source) EMF, FHFA, Real Estate Economic Institute Co., Ltd, Cabinet Office, Government of Japan
All Rights Reserved.
4
“Europe” – not same by countries, like Germany and Spain
【Home Price Index (2000=100)】
【Mortgage Debt Outstanding（Y/Y Change）】
(Source) EMF
(Source) EMF
All Rights Reserved.
5
“Population Bonus” – Correlation with Housing Bubble?
Ratio of working force population (age 15-64) over dependent population
(Source) United Nations “World Population Prospects, the 2010 Revision”
All Rights Reserved.
6
Contraction of Private Label Securities Markets in Japan and US
【Japan New Issue】
【US New Issue】
Trillion
JPY
Trillion
USD
Agency = Fannie Mae, Freddie Mac, Ginnie Mae
（Source) Japan Securities Dealers Association
（Source) Securities Industry and Financial
Markets Association
All Rights Reserved.
7
Covered Bond Markets in Europe
【Issuance】
【Outstanding】
Billion
Euro
Billion
Euro
（Source) ECBC
（Source) ECBC
All Rights Reserved.
8
What is Covered Bond?
According to European Covered Bond Council (ECBC),
“Covered bonds are debt instruments secured by a cover pool of mortgage loans
(property as collateral) or public-sector debt to which investors have a preferential claim
in the event of default.
While the nature of this preferential claim, as well as other safety features (asset
eligibility and coverage, bankruptcy-remoteness and regulation) depends on the specific
framework under which a covered bond is issued, it is the safety aspect that is common to
all covered bonds. “
http://ecbc.hypo.org/Content/default.asp?PageID=504
Key features in different covered bond frameworks are available at ECBC Covered Bond
Comparative Database
http://www.ecbc.eu/
All Rights Reserved.
9
Most European Jurisdictions introduced Covered Bond Legislations
And new legislative initiatives are emerging
in many jurisdictions around the globe.
?
（Source） vdp (The Association of German Pfandbrief Banks)
All Rights Reserved.
10
Typical Legal Framework for Covered Bonds (German Pfandbrief etc)
【When Issuing bank is solvent】
【When Issuing bank becomes insolvent】
Issuing Bank
Other
Assets
Other
Bonds
Cover
Assets
Covered
Bonds
Insolvency Administrator
Other
Assets
Other
Bonds
Cover Pool Administrator
Cover
Assets
Covered
Bonds
In case of deficiency
Investors
Investors
Stand Alone Credit of Banks
＋
All Rights Reserved.
Quality of Cover Assets
11
Covered Bond : Hybrid Nature
Balance Sheet
Treatment
Priority Claim on
Collateral
Senior
Unsecured
Debt
Covered Bond
MBS
(Securitization)
On balance
On balance
Off balance
No
Yes
Dual
Recourse
Yes
Single
Recourse
All Rights Reserved.
12
Typical Comparison of MBS vs Covered Bond
MBS
Covered Bond
Since 1970
US Origine
Off-Balance
（Static Pool）
Transferred to Investors
(→5% retention）
More Likely
（Originate to Distribute Model）
Since 1770
German Origine
On-Balance
（Dynamic Pool）
Less Likely
（Originate to Hold Model）
Loan Modification
Difficult
Easy
Market Condition
Almost Collapsed
Relatively Stable
Unfavorable
Preferential
Transferred to Investors
（Option Premium is included）
Remains with Issuers
History
Balance Sheet Treatment of
Assets
Credit Risk of the Borrowers
Moral Hazard
Regulatory Treatment
ALM Risk
All Rights Reserved.
13
Retained by Issuers
Mortgage Product vis-à-vis Funding Tool
ARM
Adjustable Rate
Mortgage
Hybrid ARM
FRM
Fixed Rate
Mortgage
Deposit
Senior Unsecured Debt
Covered Bond
MBS
(Mortgage Backed Securities)
Born by
Borrower
Shared by
Borrower and Bank
Transfrered to
Investors
Prepayment Risk
N/A
Shared by
Borrower and Bank
Transfrered to
Investors
Nomiral Rate
Low
Moderate
High
UK, Spain and many others
US Subprime
Germany
France etc
US Conforming
JHF F35
Denmark
Mortgage
Product
(Image)
Suited Funding Tool
Interest Risk
Typical Case
All Rights Reserved.
14
Diversification of MBS and Covered Bond
from the Perspectives of Cash Flow and Balance Sheet Treatment
Patern of Cash Flow
Pass-through (with Amortization and prepayment)
Bullet (Straight Bond)
On-Balance
Off-Balance
Balance Sheet Treatment of Assets
Pfandbrief （Germany）
Cédulas Hipotecarias（Spain）
Obligations Foncières（France）
Obbligazioni Bancarie Garantite（Italy）
JHF MBS（Japan）
Særligt Dækkede Obligationer （Denmark）
Fannie Mae MBS、Freddie Mac PC（US）
All Rights Reserved.
15
Ginnie Mae MBS（US）
Private Label Securities（US）
Master-Trust MBS (UK)
Securitization and secondary mortgage market – historical perspective
•
Historical developments of the securitization and secondary mortgage market in
the US and Japan are in opposite order. In the US, secondary market developed in
the 1930’s followed by the securitization in 1970’s. In Japan, securitization started
in late 1990’s to liquidate outstanding portfolio followed by development of
secondary market in the early 2000’s. This means that development of
securitization and secondary mortgage market are not necessarily interrelated.
1934
1938
FHA Fannie Mae
1970
1971
Ginnie Mae Freddie Mac
Secondary Market Operation
1977
1981
BOA
Fannie Mae
Securitization (OTD)
1997
1999
2001
2003
2007
HTB
Sanwa
GHLC
GHLC
JHF
Secondary Market Operation
Securitization (OTH)
And Securitization (OTD)
All Rights Reserved.
16
Role that central banks has played in the mortgage market during the Crisis
•
FRB purchased Agency MBS up to 1.25 trillion USD.
US Treasury injected capital to Fannie and Freddie amouting169 billion USD so far.
•
•
ECB purchased covered bond 60 billion Euro so far and announced to purchase
another 40 billion.
Bank of Japan purchased no JHF MBS so far.]
What is the opportunity cost?
Share of Central Bank purchase per outstanding balance
All Rights Reserved.
17
Challenges to Covered Bond Legislation in emerging countries
• Structural Subordination
Deposit Insurance, Senior Unsecured Debt etc.←Cap？
• Conflict with Existing Bankruptcy Protection Code
Bankruptcy Remoteness
• Investor Confidence
Possibility of Spread Tightening
• Regulatory Framework
Rationale for Preferential Treatments
• Practical Designing
Type of Asset Class, Type of Issuer etc.
← Reference: ECBC Label Initiative
http://intranet.hypo.org/docs/1/FCJJPFKBNDNGPDLLGGADEJCFPDWY9DBYB1TE4Q/EMF/Docs/DLS/2011-00105.pdf
Further, Can Covered Bond provide 30 year+ Fixed Rate Mortgage?
←Is 30+ year Fixed Rate Mortgage Necessary?
All Rights Reserved.
18
Adverse Feedback Loop in Europe – Interaction between Gov’t and BKs
Gov’t Bond
Price Decline
Fair Value Loss
Increase Debt Service
【Public Sector】
【Banking Sector】
Risk Premium
Deteriorate
Fiscal Position
Income Loss
Damage
Tighten
Underwriting
Criteria
Hard to inject
Bank
Capital
Fiscal
Consolidation
Deleverage
Restrict
Lending
Reduce Tax
Revenue
Deteriorate
Asset Quality
Less Money Supply
Cut
Expenditure
Reduce Aggregate Demands
Recession
【Real Economy】
All Rights Reserved.
19
GHLC: Government Housing Loan Corporation
JHF: Japan Housing Finance Agency
Reform of Japanese Mortgage Market
Fixed Rate Mortgage
Loan with Prepayment Penalty
GHLC
20th
Century
Est 1950
Treasury
Subsidies
GOJ
Borrowers
Government of Japan
ARM
Banks
Adjustable Rate Mortgage
Deposit
Est 2007
MBS
JHF
21st
Century
35 year Fixed Rate Mortgage
Borrowers
F35
Depositors
Mortgage Backed Security
Investors
Sell Loans to JHF
Banks and Mortgage Banks
Banks
Depositors
Deposit
ARM
All Rights Reserved.
20
JHF MBS –similarity with Covered Bond
 JHF MBS is an asset-backed Zaito bond
Before any beneficiary certificate trigger event , interest and principal are paid by JHF, as if MBS is a corporate bonds
 The credit of JHF MBS is supported by both the credit of JHF and the credit of housing loan pool
 Due to Japanese government's policy to maintain flexibility against the borrowers, JHF will recognize the housing loans
on the balance sheet even after the MBS is issued
 After an beneficiary certificate trigger event , JHF MBS, a Zaito bond, will be replaced with the beneficiary right
 Risk weight of JHF MBS, as a Zaito bond is 10% under standardized approach
 By selecting a corporate bond format, JHF contributes to the development of secondary markets
Before an Beneficiary Certificate Trigger Event
After an Beneficiary Certificate Trigger Event
JHF
Loans to be
securitized
Make timely payment
of both principal and
interest based on
JHF’s responsibility
JHF MBS
Proceeds from
the trust loan
pool are passed
along as the
repayment of the
MBS principal.
Trust banks
JHF
Trust asset
Occurrence
of event
causing a
beneficiary
interest
JHF MBS
Beneficiary
(investors)
Trust bank
Trust asset
Beneficiary
right
Dividend based on
beneficiary right
Note :Beneficiary certificate trigger events
1. The obligor of the JHF MBS becomes a joint stock corporation or a legal entity to
which file for corporate reorganization or other similar bankruptcy proceedings
can be applied
2. The failure by JHF to fulfill a payment obligation with respect to the MBS is not
cured within 7 days
Investors
All Rights Reserved.
21
JHF MBS – similar legal framework not applicable to other institutions
Legal Status
Main business
Special Public Corporation (GHLC)
Incorporated Administrative Agency (JHF)
Mortgage Origination (Funding : Treasury Borrowing)
Secondary Market Operation (Funding : MBS)
Ownership
100% Owned by the Government of Japan
Appilcability of
Bancruptcy
Proceedings
No, but if privatized,
possible depending on legal framework
No (No article pertaining to insolvency of GHLC)
1950
1999
2007
Amendment to GHLC Law
GHLC MBS Structure, including Asset Seggregation
in case of insolvency or privatization etc., introduced
Same legal framework inherited
Not applicable to other institutions
All Rights Reserved.
22
Collateral for Monthly and S-Series MBS
All Rights Reserved.
23
Issuance Volume of JHF MBS – Record High in April 2011 – 6.2 billion USD equivalent
(Source) JHF
Billion
USD
All Rights Reserved.
24
Nominal Coupon of JHF MBS and its Spread to 10 year JGB
(Source) JHF
All Rights Reserved.
25
Thank you for your attention.
(Former the Government Housing Loan Corporation)
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.