KHFC succeeds in securitization of fixed-rate loans originated by commercial banks

for the first time

- Issues KRW 368.4 billion in MBS using mortgage loans originated by commercial banks as underlying assets after launching securitization business 13 years ago -

The Korea Housing Finance Corporation began securitization in full scale using mortgage loans originated by commercial banks as underlying assets. As a result, commercial banks are expected to provide long-term, fixed-rate mortgage loans more actively as they can secure a reliable source of funding for fixed-rate loans and hedge interest rate risks.

□ KHFC succeeds in the securitization of mortgage loans originated by Standard Chartered Bank and Citibank

The Korea Housing Finance Corporation (KHFC, CEO Seo Jong-dae) announced on May 29 that it successfully issued KRW 368.4 billion in MBS with mortgage loans as underlying assets that originated as conforming loans by Standard Chartered Bank Korea and Citibank in cooperation with KHFC beginning mid-March this year.

※Conforming loans are mortgage loans that conform to a preset standard which makes them fit for securitization, hence allowing financial institutions to finance their loans more easily. Once financial institutions originate such mortgage loans under different product names and with varying interest rates, a securitization agency purchases their mortgages and converts them into tradable securities such as mortgage-backed securities (MBS).

□ Succeeds in the securitization of conforming loans 13 years after launching the securitization business

Since the establishment of KoMoCO in 1999 and KHFC in 2004, KHFC has continuously initiated the securitization of conforming loans originated by commercial banks. However, securitization by KHFC had until now been limited to the mortgage claims of Bogeumjari Loans because the share of fixed-rate loans offered by commercial banks was very small. KHFC has finally succeeded in securitization in a true sense by using long-term, fixed-rate loans provided by financial institutions on their own as underlying assets.

In addition, the securitization of mortgage loans originated by commercials banks was issued at the same interest rate as MBS using Bogeumjari Loans provided directly by KHFC as underlying assets, offering a new source of funding to private financial institutions for long-term, low-priced, fixed-rate loans.

□ Volume of securitization of conforming loans expected to rise due to participation by large banks such as NACF and Hana Bank

KHFC launched conforming loans by signing MOUs with Standard Chartered Bank Korea and Citibank in March this year. The recent MBS was issued using loans originated by both banks (SC: KRW 284.8 billion, Citi: KRW 78.1 billion) as underlying assets. KHFC also signed MOUs on conforming loans with Hana Bank and NACF on May 15, signaling that the volume of securitization is likely to rise further.

□ Playing a crucial role in advancing housing finance and stabilizing household debts

KHFC CEO Seo Jong-dae said, "We have just begun to issue MBS using fixed-rate mortgage loans by financial institutions as underlying assets. Following Standard Chartered Bank and Citibank, NACF and Hana Bank will also launch conforming loans. This should activate the supply and securitization of conforming loans by commercial banks." He also stressed that the recent securitization of conforming loans will greatly accelerate the advancement of the housing loan market and expand the availability of fixed-rate and installment repayment loans.