XN000022-1996-06-27 — Page 67

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Proposal to set up mortgage corporation

Following is the question by the Hon Sin Chung-kai and a written reply by the Secretary for Financial Services, Mr Raphel Hui, in the Legislative Council today (Wednesday):

Question:

Regarding the proposal to set up a Mortgage Corporation, will the Government inform this Council:

(a)

(b)

(c)

(d)

(e)

why, in addition to playing the role of an agency or a regulatory body in assessing the quality of mortgage pool, the Mortgage Corporation should take up the intermediary role which can be played by the private sector;

of the benchmark which will be adopted by the Mortgage Corporation in setting the price of the mortgage-backed securities (MBS);

of the difference in status between the MBS issued by the Mortgage Corporation and the Exchange Fund Notes issued by Hong Kong Monetary Authority;

whether it knows of any government-owned mortgage corporation in other countries which is incorporated as a private limited company; and

whether it knows of any central bank in other countries which runs profit-making businesses such as a mortgage corporation?

Reply:

(a)

A mortgage corporation is a financial intermediary operating on a commercial basis. It typically purchases residential mortgage loans from loan originators and funds such purchase through the issue of debt securities. It assesses the quality of the mortgage loan pool for the purpose of managing the credit risk of the mortgage loans it purchases. It does not perform the credit assessment function for regulatory

purposes.