MBS Benefits
- MBS benefits investors and housing fund borrowers, as well as the financial companies involved in MBS.
- However, the biggest advantage of the MBS system is that it gives great benefits to the general public.
- The funds raised through issuance of MBS are used again for the loans for home buyers, the loans for tenants, the loans for middle payment and construction of rental apartments, contributing to housing stability and property formation of the general public....
- How does MBS benefit a homebuyer?
By enabling steady supply of long-term loan funds at low, fixed interest rate, MBS makes mortgage loans more affordable and allows more stable P&I payment schedule.
- It becomes easier to borrow housing funds.
- As the financial resources of financial institutions increase, home buyers find it easier to borrow housing funds.
- In particular, the loan to value grows up to 70%, reducing the burden of self-funding when buying a house.
- Reduced burden of repaying the principal and interest.
- MBS reduces the burden of borrower’s repayment of principal and interest through smooth supply of long-term, low-interest and fixed-rate load funds, and enables designing of stable repayment schedule.
- What are the benefits of MBS to lenders(financial institutions) who originate mortgage loans?
By transferring mortgage loans to KHFC through securitization, financial institutions can eliminate the credit risk and interest risk associated with the loans. Other benefits include the improvement of BIS ratio (the min. mandatory BIS capital adequacy ratio of 8%), expansion of customer base, and diversification of profit portfolio.
- Improvement of BIS ratio.
- Through securitization, mortgage lenders(financial institutions) can improve the BIS ratio by transferring the mortgage loans to KHFC or replacing them with MBS of no weighted risk.
- Expansion of customer base.
- As LTV of up to 70% applies to loans for KHFC securitization, financial institutions can secure long-term customers requiring high loan limit.
- Diversification of profit portfolio.
- Financial institutions can diversify their profit portfolio with servicing fees for the securitization.
- What are the advantages of MBS to investors?
MBS is a safe investment vehicle with AAA credit rating and payment guarantee of KHFC. In addition, it caters to various investment needs with various maturities.
- It is a safe investment.
- MBS received AAA credit rating from domestic credit rating agencies.
- MBS is issued under HF’s payment guarantee.
- MBS is even saver as the government indemnifies against settlement loss.
- MBS has high liquidity.
- It is listed on the Korea Exchange immediately after issuance, and you can easily trade and liquidate it.
- MBS is issued with a variety of maturity structures.
- MBS is issued with various maturity structures to meet various funding needs of investors. It is especially suitable for insurance, pension and fund management since the ratio of mid-to-long-term products is high.