Submitted by: Submitted by wweian
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Category: Business and Industry
Date Submitted: 09/30/2011 10:28 AM
Describe the importance of mortgage securitization from a United States (USA) historical perspective.
“In USA, the securitization market began in the 1970’s that with the securitization of residential mortgages by the Government National Mortgage Association. During the 1980’s the market continued to develop in the United States with the introduction of new asset classes—in particular, auto loans and credit card receivables. It started to grow exponentially in the 1990’s, expanding to virtually all types of assets which yield future cash flows.” ( Herrington & LLP,2003)
The United States is the birthplace of mortgage securitization, also is one of the largest markets in the development scale. In recent decades, Mortgage Securitization Industry has the fastest growing in the world, and also it is one of the most far-reaching influence innovation in financial industry. Hence, in United States historical perspective, Mortgage Securitization brings the enormous influence, whether economic or system, which helped the financial industry of US to have a rapid development in the world.
Firstly, to promote the real estate industry’s development, and help more people to have their own housing.
Secondly, to help banks to concentrate funds. It broadens the channels, expand the bank to raise funds, and enhance the asset of the bank expansion ability. In a word, it is a tool for capital raising.
Thirdly, to prompt the government to set up a series of institutions, such as, FHA ,FNMA and FHLMC. These institutions to help government to manage and supervise the mortgage securitization market. Meanwhile, they provide a dispersing risk system to help banks to control the interest rates risk, liquidity risk and advance payment risk, to promote mortgage mark effective development. ( FU, 2006)
Fourthly, according to the institutions set up, some systems and policies could improve, such as, tax and law. With the development of securitization, the government had to improve...