Mortgage Securitization — Lessons for Emerging Markets (July, 2007, 57 p.)
It is commonly accepted that a well-developed primary residential mortgage market promotes homeownership and that homeownership in turn promotes economic and political stability. Secondary mortgage markets (SMMs) serve to enhance primary mortgage markets by separating the mortgage investment and origination functions. This separation increases the number of mortgage investors and, ultimately, the amount of capital available in the market. Increased competition in the primary market leads to more choices and lowers costs for borrowers. The net effect is to expand the benefits accruing from a primary mortgage market: making homeownership cheaper and more affordable, and expanding the ability of citizens to become homeowners.
For emerging mortgage markets, the issue is when to implement a secondary market. Many of the international delegations that visit the U.S. Department of Housing and Urban Development each year ask for advice on when to do so. For this reason, the Office of Policy Development and Research, through its Office of International Affairs, has commissioned this study, “Mortgage Securitization—Lessons for Emerging Mortgage Markets.” This study is intended primarily for an international audience. It identifies the essential elements that are needed for the success of a secondary market, based primarily on the experience in the United States but also referencing other countries that have SMMs and including case studies of Romania, Taiwan, and Guatemala.
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