U.S. Mortgage Markets and Institutions and Their Relevance for Korea

U.S. Mortgage Markets and Institutions and Their Relevance for Korea
Behling, David J.Eom, KyongShik
housing mortgage; mortgage-backed securities; real estate finance; consumer lending; Korea
Issue Date
Series/Report no.
KDI Working Paper Series;02-08
In this paper, we describe the development and key features of the U.S. housing and mortgage markets, institutions, and policies. Similarities and differences between U.S. and Korean systems are presented. Recent changes in Korean housing and mortgage lending activities are analyzed and further changes in Korean policy are proposed. These include greater reliance on market forces in housing construction and the provision of a more advanced infrastructure for mortgage lending. Drawing on U.S. experience, we suggest mandatory title insurance, home inspections prior to sale, mandatory home value appraisals, more extensive mortgage and property insurance, the professional training of real estate agents, the establishment of a credit bureau and greater use of credit scoring models in mortgage underwriting. We also strongly recommend greater standardization of mortgage instruments and mortgage underwriting processes and documentation. Again drawing on U.S. experience, we find that achievement of these measures will greatly accelerate the development of a mortgage-backed securities market in Korea.
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