A thesis submitted in partial fulfillment of the requirements for the degree of Master of Science, School of Environment, Resources and Development

Thesis (M.Sc.) - Asian Institute of Technology, 1999

In order to solve the problems of housing finance in Korea, such as the low capacity of primary mortgage market and the underdevelopment of housing finance system, the operation of a secondary mortgage market is required. Among the operational models of secondary mortgage market, the most widespread and successful one is the mortgage securitization through the secondary mortgage market facilities In order for the securitization of mortgages to be successful in the Korean situation, the secondary mortgage market facilities (SMMF), such as FNMA, FHLMC and GNMA of the U.S, should be established. The establishment of the secondary mortgage market facilities has the following merits; expansion of mortgage lending, increase of the BIS capital ratio of mortgage lenders, reduction of the mortgage securitization cost attendant upon standardization, early anchorage of the MBS market. When We establish SMMF, factors to be considered are as follows; the number of SMMF, credit rating, financial techniques, capital structure, capital size and liquidity of SMMF. We can identify the following critical aspects of the SMMF. First, the number of SMMF should be one. Second, SMMF should maintain high credit rating. Third, in order to enhance the public trust of SMMF the government should invest a sufficient amount of capital in SMMF. Fourth, the capital size of SMMF should be sufficient for the subrogation of insolvent debt. Fifth, SMMF should be allowed to issue bond and borrow from abroad in order to maintain the liquidity. In addition, the special law "Act of SMMF" should be legislated in order to facilitate the mortgage securitization of SMMF. And a systematic tax and other incentives should be provided for SMMF