A Study on Prepayment Risk of Residential Mortgage-backed Securitization in China—A Case of "JIAMEI 2018-1 MBS Program"

Research Article
Open access

A Study on Prepayment Risk of Residential Mortgage-backed Securitization in China—A Case of "JIAMEI 2018-1 MBS Program"

Xinran Jiang 1* , Zhichuan Yin 2 , Yinan Lin 3 , Nuo Lei 4 , Kangning Wu 5
  • 1 McGill University    
  • 2 New York University    
  • 3 University of Ottawa    
  • 4 Ohio state university 3    
  • 5 Hunan University of Technology and Business    
  • *corresponding author xinran.jiang@mail.mcgill.ca
Published on 13 September 2023 | https://doi.org/10.54254/2754-1169/8/20230286
AEMPS Vol.8
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-915371-43-0
ISBN (Online): 978-1-915371-44-7

Abstract

The Residential Mortgage-Backed Securities market (RMBS) has played a large role in enhancing the liquidity of mortgages, and in relieving the pressure of capital constraints on commercial banks. There are three main risks associated with residential mortgage-backed securitization: prepayment risk, interest rate risk, and default risk. This paper analyzes the prepayment risk in the "JIAMEI 2018-1"RMBS, the largest single RMBS product of the Postal Saving Bank of China (About 14 billion RMB). We introduce the JIAMEI 2 018-1 and study the factors that affect its prepayment risk. Using data, we conclude that the products involved in this case have comparatively low prepayment risk, even under the double influence of the housing finance policy tightening and the impact of the COVID-19 Pandemic.

Keywords:

RMBS market in China; prepayment risk

Jiang,X.;Yin,Z.;Lin,Y.;Lei,N.;Wu,K. (2023). A Study on Prepayment Risk of Residential Mortgage-backed Securitization in China—A Case of "JIAMEI 2018-1 MBS Program". Advances in Economics, Management and Political Sciences,8,75-85.
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References

[1]. A. Fuster, D. Lucca, J. Vickery. (2022) Mortgage-Backed Securities 2: 2-4

[2]. Yuanyuan (2022) Be alert! More and more people are paying off their mortgages early. https://new.qq.com/omn/20220514/20220514A036OZ00.html

[3]. Guo Xiangdong, published on Journal of Inner Mongolia Agricultural University (SocialScience Edition), 009－4458（2006）02－0045－02.

[4]. Zhu, J. (2011). Analysis of early repayment risk of housing mortgage securitization. Times Finance, 2011, (2), 127-128.

[5]. Zhang, J. (2015). Jianyuan 2007-1 Securitization of Individual Home Mortgage Loans A Study of Early Repayment Risk. Zhongnan University of Economics and Law.

[6]. Jiang, T. (2017). Jianyuan 2005-1 Securitization of Individual Home Mortgage Loans A Study of Early Repayment Risk. Zhongnan University of Economics and Law.

[7]. Tian, H. (2019). Study on the influencing factors of prepayment behaviour in mortgage-backed securitization. University of International Business and Economics.

[8]. Zhao, X. (2021). "Jianyuan 2020-10" Individual Housing Mortgage-Backed Certificates Valuation analysis of the senior A-1 tranche. Southwest University of Finance and Economics.

[9]. Busser S A Hendershott P H. Pricing default free mortgage [J]. Housing Finance Review, 1984, 3(4):405.

[10]. Quigley J M.Interest rate variations&mortgage prepayment and household mobility [J]. Review of Economics and Statistics, 1987, 69(4):636

[11]. Calhoun C A, Deng Y H.A dynamic analysis of fixed-and adjustable-rate mortgage termination[J]. Journal of Real Estate Finance and Economics, 2002,24(1/2):9.

[12]. Liu H, Sun B. Empirical Study on Prepayment Risk Factors of Individual Housing Mortgage Loan[J]. Journal of Tongji University (natural science), 2007, Vol.35, No.1.

Cite this article

Jiang,X.;Yin,Z.;Lin,Y.;Lei,N.;Wu,K. (2023). A Study on Prepayment Risk of Residential Mortgage-backed Securitization in China—A Case of "JIAMEI 2018-1 MBS Program". Advances in Economics, Management and Political Sciences,8,75-85.

Data availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

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About volume

Volume title: Proceedings of the 2nd International Conference on Business and Policy Studies

ISBN：978-1-915371-43-0(Print) / 978-1-915371-44-7(Online)
Editor：Javier Cifuentes-Faura, Canh Thien Dang
Conference website: https://2023.confbps.org/
Conference date: 26 February 2023
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.8
ISSN：2754-1169(Print) / 2754-1177(Online)

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References

[1]. A. Fuster, D. Lucca, J. Vickery. (2022) Mortgage-Backed Securities 2: 2-4

[2]. Yuanyuan (2022) Be alert! More and more people are paying off their mortgages early. https://new.qq.com/omn/20220514/20220514A036OZ00.html

[3]. Guo Xiangdong, published on Journal of Inner Mongolia Agricultural University (SocialScience Edition), 009－4458（2006）02－0045－02.

[4]. Zhu, J. (2011). Analysis of early repayment risk of housing mortgage securitization. Times Finance, 2011, (2), 127-128.

[5]. Zhang, J. (2015). Jianyuan 2007-1 Securitization of Individual Home Mortgage Loans A Study of Early Repayment Risk. Zhongnan University of Economics and Law.

[6]. Jiang, T. (2017). Jianyuan 2005-1 Securitization of Individual Home Mortgage Loans A Study of Early Repayment Risk. Zhongnan University of Economics and Law.

[7]. Tian, H. (2019). Study on the influencing factors of prepayment behaviour in mortgage-backed securitization. University of International Business and Economics.

[8]. Zhao, X. (2021). "Jianyuan 2020-10" Individual Housing Mortgage-Backed Certificates Valuation analysis of the senior A-1 tranche. Southwest University of Finance and Economics.

[9]. Busser S A Hendershott P H. Pricing default free mortgage [J]. Housing Finance Review, 1984, 3(4):405.

[10]. Quigley J M.Interest rate variations&mortgage prepayment and household mobility [J]. Review of Economics and Statistics, 1987, 69(4):636

[11]. Calhoun C A, Deng Y H.A dynamic analysis of fixed-and adjustable-rate mortgage termination[J]. Journal of Real Estate Finance and Economics, 2002,24(1/2):9.

[12]. Liu H, Sun B. Empirical Study on Prepayment Risk Factors of Individual Housing Mortgage Loan[J]. Journal of Tongji University (natural science), 2007, Vol.35, No.1.

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