The Hong Kong Mortgage Corp. (HKMC) launched its very first mortgage-backed securitization recently a HK$1 billion (US$129 million) issue backed by housing loans originated by Dao Heng Bank.
Under the program, the HKMC will buy about HK$1 billion of residential mortgage loans from Dao Heng and sell the pool to HKMC Funding Corp. (1) Ltd., a bankruptcy-remote special purpose vehicle, which will then issue MBS back to the bank.
Dao Heng purchased a total of four pools, all of which were priced at 110 basis points below prime, or 7.4% on the launch date.
Most Hong Kong banks are unlikely to take advantage of the HKMC program, given that most of them have no shortage of cash and are fighting to increase their residential mortgage concentrations, noted sources. Still, "what the HKMC is doing now is how Freddie Mac and Ginnie Mae got started in the U.S. It's a great step forward for the local market and will help people understand MBS," said one analyst.