Misaligned Incentives and Mortgage Lending in Asia

This paper provides a conceptual basis for the price discovery potential for tradable market instruments and specifically the development of mortgage securitization in Asia and the potential dangers of such markets. Nonetheless we argue for the potential importance of securitization in Asia because of its possible role in increasing transparency of the financial sector of Asian economies. We put forth a model explaining how misaligned incentives can lead to bank generated real estate crashes and macroeconomic instability, with or without securitization under certain circumstances. We examine the banking sectors performance in Asia compared to securitized real estate returns, to provide evidence on the contribution of misaligned incentives in the past. We discuss how the addition of liquid MBS could help to inoculate markets from the shocks arising from bank-financed mortgage lending. We conclude with a brief discussion of current MBS markets in Asia.tradable market instruments, price discovery, mortgage securitization, dangers, Transparency, MBS markets

Lodging Real Estate Finance: Securitization

Commercial Mortgage Backed Securities (CMBSs) introduced to the U.S. lodging industry in the early 1990’s were a panacea during a period of severe shortage of debt capital. These instruments changed commercial real estate capital markets by providing flexibility and liquidity to an otherwise illiquid investment As a relatively new form of financing to the lodging industry, the mechanics of securitization, the types of CMBS investments, and their structure are not well understood. The article illustrates the process of securitization and its importance as a significant source of debt financing to the lodging industr

Securitization of Lodging Real Estate Finance

In the early 1990s, the U.S. lodging industry witnessed a severe shortage of debt capital as traditional lenders exited the market. During this period hotel lending was revolutionized by the emergence of real estate debt securities. The author discusses key factors which have affected the growth and development of commercial mortgage backed securities and their changing role as a significant source of debt capital to the lodging industry

Global Real Estate Markets - Cycles and Fundamentals

The correlations among international real estate markets are surprisingly high, given the degree to which they are segmented. While industrial, office and retail properties exist all around the world, they are not economic substitutes because of locational specificity. In addition, the broad securitization of real estate property companies has, until recently, lagged that of other types of companies. Never-the-less, international property returns move together in dramatic fashion. In this paper, we use eleven years of global property returns to explore the factors influencing this co-movement. We attribute a substantial amount of the correlation across world property markets to the effects of changes in GNP, suggesting that real estate is a bet on fundamental economic variables which are correlated across countries. A decomposition shows that a local production factor is more important in some countries than in others.

The possibility of securitization system of real estate market in Japan

Thesis (M.C.P.)--Massachusetts Institute of Technology, Dept. of Urban Studies and Planning, 1999.Includes bibliographical references (leaves 69-71).Although it will take time, a new financing method, securitization, will help supply the real estate market with direct investments and expand capital available to finance real estate, which would stimulate the real estate market and the Japanese economy. However, examining the experience of securitization in the U.S. make it clear that to achieve this goal, there are still many problems to be solved regarding Japan's financing system, including non-recourse system, tax issues, disclosure matters, appraisal methods and the establishment of the secondary market. Not only investors' actions but also the government's actions will decide the success of the securitization in Japan. Its success depends on the diversity of securitization products, which attract many kinds of investors, and the growth of the infrastructure of the securitization market. The above problems will be solved step by step. The facilitation of governmental institutions for securitization is necessary to expand it in Japan faster. If these factors are resolved, the securitization system will revive the real estate market in Japan and make the market a totally different one.by Hiroki Takatsuka.M.C.P

Issues in securitization of real estate under the Japanese economy in transition

Thesis (M.C.P.)--Massachusetts Institute of Technology, Dept. of Urban Studies and Planning, 1999.Includes bibliographical references (leaves 84-86).Since the end of the Bubble Economy of 1992, Japan has been suffering from the severest and the longest lasting recession it has experienced in the 50 years following the World War II. In this thesis, the true implications of real estate securitization and its potential contribution to the recovery of the Japanese economy are examined. Repairing real estate market is one of the keys to reversing the economic downtrend. The results show that real estate securitization will contribute significantly to the effort to save the Japanese economy. However, it is important to reform the practices, systems, and infrastructure of the real estate market to carry out successful securitization. The major positive implications of real estate securitization include diversification of financing and investment opportunities, the reduction of liquidity risk of real estate, the expansion of the real estate market by increasing the numbers of transactions, promotion of direct financing rather than indirect, use of widened techniques for managing Japanese individual assets, the identification of new business opportunities, and finally, by promotion of reform of a land evaluation method to meet a global standard.by Megumi Ando.M.C.P

The securitization of the real estate market in Korea : future impacts to the Korean real estate market

Thesis (S.M.)--Massachusetts Institute of Technology, Dept. of Urban Studies and Planning, 1999.Includes bibliographical references (leaves 67-68).The real estate policy of the Korean government had until recently only focused on restraining speculative investment in the real estate market, which was the prevalent consensus in the country in the 1970's and the 1980's. These strict measures in the real estate market have been a serious obstacle to the government, in their active efforts to gain foreign capital in order to overcome the economic crisis since the International Monetary Fund $55 billion bailout to the Korean government. During the Asian crisis, both large institutional companies and small businesses went bankrupt due to financial distress caused by over-leverage. Consequently, the government has changed the paradigm of real estate policies on the basis of a free market principle, and has completely opened the real estate market to foreign investors in order to solve some of the current financial problems and to provide a momentum to redevelop the Korean economy. As part of the ongoing effort to stabilize the Korea economy, securitization in the real estate market is inevitable. In this thesis, the securitization efforts undertaken by the government will be examined to infer their future impacts on the real estate market of Korea. With the first issuance of asset backed-securities (ABS) by the Korea Asset Management Corporation (KAMCO), a resolution trust formed by the Korean government to liquidate non-performing loans, the outlook of the Korean economy is positive yet with a degree of uncertainty. In addition, the introduction of mortgage-backed securities (MBS) and real estate investment trusts (REITs) could have a profound effect on the Korean financial markets.by Joon Ho Byun and Tommy Shih-I Chao.S.M

Securitization of real estate assets in China

Includes bibliographical references (p. 77-81).Thesis (B.Sc)--University of Hong Kong, 2010.published_or_final_versio

Real Estate and the Great Crisis: Lessons for Macroprudential Policy

Credit conditions have caused real estate booms and busts, owing to an underpricing of credit risk aided by regulatory arbitrage and shadow financing. Across countries, real estate price and credit bubbles have reflected not only inelastic land supply and thin trading, but also the amplification of shocks via backward-looking price expectations and financing based on distorted prices. Macroprudential lessons from the Great Crisis include preventing excess real estate financing and limiting the amplification and correlation of risks. Nonetheless, the costs and benefits of recent regulations require re-evaluation amid an ongoing need to address correlated risks from shadow financing and securitization