The Hong Kong Mortgage Corporation (HKMC) is preparing to launch its first mortgage-backed securitization this fall. "We should be ready to issue after late September or early October. If we can secure at least one bank willing to do this, we'll do one issue as a pilot and then some more," said Pamela Lamoreaux, senior vice president of operations, adding that the HKMC was talking to several interested sellers.

The debut issue would be at least HK$1 billion ($130 million) and targeted to domestic investors. No decision has yet been made as to whether the HKMC would arrange the transaction itself or mandate an outside bank. Since the issue will be denominated in local currency, no credit rating would be sought, Lamoreaux added.

Issuance of MBS has been a key goal of the HKMC since it was set up in 1997 with the aim of developing a domestic secondary mortgage market in Hong Kong. Recently, its board of directors approved a pilot scheme in principle.

Under the proposed scheme, the HKMC would purchase mortgages from individual banks and transfer them to a special purpose vehicle. The SPV would then issue MBS back to the originator, with a guarantee from the HKMC for the timely payment of principal and interest.

Some sources have said that it was unlikely that the HKMC would find enough willing sellers to allow them to go ahead with the debut MBS issue.

"Unless they want to securitize a portion of what they already have on hand, HKMC will probably have a hard time. They're way below their target for purchases, and most banks are jealously guarding their mortgage loan assets and fighting each other for customers," commented one source in Hong Kong.

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