Subprime Mortgage in Hong Kong?
It has already found to be very wrong for the government to loan people for "buying" a housing unit (in the US Subprime Crisis). A government is undoubtedly incompetent to run a banking business. It is highly undesirable to suggest Hong Kong government to follow the fatal suit.
Ninja loan has become worldwide famous after the US Subprime Crisis, it stands for No Income, No Job, No Asset. But since the US government pushed to increase the homeownership ratio, loans to Ninja to buy houses were granted, and were known as Subprime Mortgage. They were mostly purchased by the Freddie and Fannie, two quasi public mortgage funding organizations.
Randall Dodd and Paul Mills's (2008) US Subprime Contagion,http://www.imf.org/external/pubs/ft/fandd/2008/06/pdf/dodd.pdf of IMF have made it clear that "There is nothing inherently wrong or reckless about lending to borrowers with lower incomes and lower credit scores. But prudence dictates that in making subprime loans, lenders must control the risks by more closely evaluating the borrower, setting higher standards for collateral, and charging rates commensurate with the greater risks.
Too often, however, standards were steadily loosened in recent subprime and “Alt-A” (whose risks are between prime and subprime) lending. Instead, many subprime mortgages were “ninja” loans—standing for no income, no job, and no assets."
The government must admit that mortgage risk management is NOT her expertise, and lending loans to people at a fixed low interest rate for an excessive long period of time regardless of their repayment capability, credit rating, etc, is tempting more people (originally unintended) to buy more (unneccessary to buy) housing units, which can cause a financial disaster.
When borrowers become unemployed or unable to repay mortgages, forclosures of the housing units are not only causing homelessness, but it is also forfeiting most of their savings and reserves....
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