Differentiated Housing Policies for Different Income Groups Necessary for Reducing the Costs of Buying a Home

- HF hosts the ‘19 AFIS conference and ASMMA General Assembly

- HF discusses pressing housing finance issues with 12 other ASMMA members to advance housing finance systems in the region

Regarding the issue of how to reduce the financial burden of buying a home, one researcher suggested differentiated housing policies for different income brackets and rental market stimulation. Another offered that various subsidy schemes and sustainable incentives should be considered to stimulate green bond* issuance. 

  * Green bond: Bonds whose use is restricted to green sectors to finance eco-friendly and new and renewable energy projects     

Korea Housing Finance Corporation (HF, CEO Lee Jung-Hwan) hosted the 2019 AFIS* Conference at Lotte Hotel Busan on September 3, 2019. The international finance conference drew about 150 participants from the World Bank, the European Covered Bond Council, other international financial organizations, financial institutions at home and abroad, the Korean government, and news agencies. It served as a venue for sharing knowledge and opinions to further develop Asia's housing finance markets. 

  * Asian Fixed Income Summit (AFIS): An annual international secondary mortgage market forum launched in 2014 to strengthen the competitiveness of the securitization and money markets in Asia and advance each Asian nation’s housing finance policy efforts

Under the title “The New Era of Mortgage Finance,” the Conference kicked off with a keynote speech by Luca Bertalot, Chairperson of the European Covered Bond Committee, and consisted of three sessions on the following themes: ▲ ESG bonds*, ▲ long-term bonds and securitization markets, and ▲ reverse mortgages. 

  * ESG bonds: Bonds that contribute to social value creation from the environmental, social, and governance perspectives   

Session I: Sustainable incentives needed to promote green bond issuance

  Chairperson Luca Bertalot delivered his keynote speech on the theme of Energy Efficient Mortgages Initiatives, stressing eco-friendliness and energy efficiency among other key issues of future housing finance. 

   Highlighting the current status and future potential of green bonds in their remarks, Maureen Schuller, Head of INC Group’s Covered Bond Strategy and Financials Research, and Colin Chen, Head of Structured Debt Solutions in the Treasury and Markets Division at DBS Bank, shared the respective European and Singaporean cases of green bonds, saying that a range of subsidy measures and sustainable incentives need to be adopted to boost green bond issuance. Mr. Schuller, in particular, mentioned demanding issuance requirements as one of the main causes of the stagnant green bond market. He predicted that a sustainable plan-based system will impact green bond issuance positively.      

   His speech was followed by a floor discussion presided over by Lee Yoo-Tae, a professor at Pukyong National University. During the open discussion, HF Director Jung Jae-Seon shared HF’s social covered bond issuances and future issuance plans with the participants.

Session II: Differentiated policies needed for different income groups to reduce their burden of buying a home 

   Noting the ever-increasing burden of purchasing a home in Asia, Matthias Helble, an economist at the Asian Development Bank, shared her view that with the price-to-income ratio (PIR) significantly high in major Asian cities, differentiated housing policies for different income groups and rental market stimulation are needed to resolve the situation.  

   On the topic of how to utilize the primary mortgage market, World Bank Senior Specialist Simon Willey said that most emerging economies experience extremely poor housing affordability, stressing that these countries should implement housing supply and housing finance measures in accordance with the UN Sustainable Development Goals. 

Session III: Real estate securitization important to ensure financial stability in retirement

   Hwang Min, a professor at George Washington University, and Tyler Yang, CEO of IFE Group, staged their joint presentation under the title “Reverse Mortgage: A New Financial Solution for an Aging Society,” offering a comparison of Korea’s JooTaekYeonKeum (JTYK) and the U.S. reverse mortgage HECM* program. 

   In the presentation, Professor Hwang said, “One important question to ask in this era of aging societies is whether you are financially prepared for your retirement years. This makes real estate securitization particularly important.” He went on to say, “Having been under the U.S. government’s guarantee since 2007, the U.S. HECM scheme has established a stable financing channel by adopting HMBS** and other reverse mortgage programs.” But he also acknowledged that there are still challenges in stimulating HMBS issuance in terms of the market conditions and the attractiveness of the reverse mortgage scheme. Mr. Yang mentioned that the HECM loan limit drives down the maximum loan amount and drives up insurance premiums, stressing the need to “consider the British SAM*** reverse mortgage program because it is designed to allow originators to enjoy the benefits of an increase in home prices.” 

   Regarding this, Hwang In-Seong, Director of HF Housing Finance Research Institute, shared the history and accomplishments of the Korean JTYK program modeled on the U.S. HECM program, proposing risk management measures after analyzing the two models’ differences. 

  * HECM (Home Equity Conversion Mortgage): A reverse mortgage insured by the U.S. government

 ** HMBS(HECM Mortgage Backed Securities): HECM mortgage-backed securities 

*** SAM(Shared Appreciation Mortgage): The U.K.'s shared appreciation mortgage in which an increase in the value of the property is shared with the lender

An HF officer said, “We were able to host the 2019 AFIS Conference and ASMMA General Assembly in Busan, a major international financial hub, as a result of our continued cooperation with other Asian housing finance institutions. As a leading public housing finance institution, we will continue to contribute to advancing the housing markets in Asia.”

The 6th General Assembly of the Asian Secondary Mortgage Market (ASMMA), to be held at Busan Nurimaru APEC House on the 4th, will feature a ceremony to hand over the 2020 ASMMA presidency to HF. At the General Assembly, participants will discuss current housing finance issues and cooperation measures for the development of the Asian housing finance markets.

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HF CEO Lee Jung-Hwan delivers his opening remarks at the 2019 AFIS Conference held at the Lotte Hotel in Gaya-daero, Busan, on the 3th.