Asset-backed securities see spike

The amount of asset-backed securities (ABS) issued in the third quarter jumped nearly 160 percent from a year earlier, as popularity for a government-proposed mortgage loan released in the previous quarter delayed the issuance of other mortgage-backed securities (MBS).

A regular report from the Financial Supervisory Service, a top financial regulatory, showed Thursday that the total amount of ABS issued between July through September totaled 20.3 trillion won ($17.8 billion), surging from 7.8 trillion won during the same period last year.

More than half were mortgage-backed securities, totaling 13.1 trillion won. The issuance of MBS skyrocketed nearly four times from the same period last year, the FSS report said.

The surge in MBS was mainly because of a newly launched mortgage program by the government in the second quarter, dubbed “shifting to a safer loan.”

In the midst of historic-low borrowing costs following the central bank’s rate cuts to 1.5 percent since July 2014, the program offered an unusual chance for mortgage holders to shift to a long-term, fixed-rate mortgage if they met some conditions.

The popularity for the new loan program, open between May and June with additional offering in July, was massive - about 31 trillion won worth of mortgages were converted into the program in total.

“In the second quarter, we planned to issue mortgage-backed securities on other state-run mortgage loans, but the new loan program was launched and it was so popular,” said a FSS official by phone. “So we set aside the issuance on other mortgages during the second quarter, and issued those for the new program first in order to liquidate them as quickly as possible.

“So in the third quarter, securities for the postponed mortgage loans were issued, and they accounted for most of the MBS issued,” he said.

By issuers, the Korea Housing Finance Corporation was the largest owner of MBS, at 13.1 trillion won in total value. Financial institutions including banks, credit card companies and brokerage firms held 4.8 trillion won worth of ABS in total.

BY KIM HEE-JIN [kim.heejin@joongang.co.kr]