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| Addressing
Reform of the Government Housing Loan Corporation |
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Plan for
reorganization and rationalization of government-affiliated corporations
(Cabinet meeting decision of December 2001)
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The Government
Housing Loan Corporation is to be abolished within five years. Securitization
business will be carried out by a new independent administrative institution. |
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Financing
operations are being reduced step by step since FY 2002.
Final decisions will be made when an independent administrative institution
is set up after taking into consideration whether private financing
institutions are handling the matter smoothly. |
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Supplies
of private-sector, long-term, fixed-rate loans are at low levels regardless
of the need for long-term, fixed-rate loans. |
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More
than half of persons planning to acquire housing hope for a
housing loan with a fixed rate over the whole life of the loan.
(2004 The Government Housing Loan Corporation study) |
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Only
5% of all new private-sector housing loans have fixed rates
for more than a ten-year period (as of the first half of FY
2004) (according to a 2004 MLIT study) |
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The Government
Housing Loan Corporation will be abolished on April 1, 2007, based
on the plan for reorganization and rationalization of government-affiliated
corporations, and a new independent administrative institution will
be established to provide support for securitization (Housing Finance
Services Agency). (Setup proposal was approved in a previous ordinary
session of the Diet) |
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Housing
Finance Services will be managed independently with the goal of supporting
and supplementing private-sector financing institutions. |
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Financing
in the private sector will be limited to difficult areas, and main
operations will be switched to support for securitization. |
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 Operations
to performed by Housing Finance Services Agency |
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The
mortgage support organization, managed independently, will carry out
the following operations with the goal of supporting and supplementing
private-sector financing institutions. |
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| 1. |
Support
for securitization |
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Support
for provision of private-sector, long-term, fixed-rate
housing loans |
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| 2. |
Financing
insurance |
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Encouragement
for a smooth supply of private-sector loans led by medium-sized
or small financial institutions |
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| 3. |
Provision
of housing information |
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To
supply housing loan and housing-related information so
that the consumer can select the best loan |
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| 4. |
Financing
operations |
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This
area is important in terms of policies, however, it is
disaster-related area, and the private sector has difficulty
in supplying financing here so it is limited to the revitalization
of city housing.
With respect to the handling
of financing designed for individuals, final decisions
will be made after taking into account the status of securitization
loans and the course of operations of private-sector financing
institutions, until a new independent administrative institution
has been set up based on a plan for the reorganization
and rationalization of government-affiliated corporations.
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Ensuring
and guiding housing quality |
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Regarding
earthquake proofing, energy saving, and barrier-free construction,
housing quality will be ensured and guided by taking advantage
of securitized loans. |
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Management
of past claims |
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Past
claims of The Government Housing Loan Corporation will
be managed appropriately by establishing a special account
separate from new operations. The new account will include
liabilities for guarantees of assurance associations. |
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| Envisioned
reform of the mortgage market |
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The main operations of Housing
Finance Service Agency will be to provide support for securitization
to allow private-sector financing institutions to supply long-term,
fixed-rate loans. |
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Foundations for a stable supply of long-term,
fixed rate loans will be established by shifting risks associated
with long-term, fixed rate loans to a broad cross-section of investors. |
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Except for cases of responding to disasters,
all funding for Housing Finance Services Agency will be procured in
the market (in principle via the application of fiscal investment
and loan program funds for direct financing). |
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| Mechanism
of operations to support securitization |
Starting October
2003, a mechanism was constructed to support the supply of private-sector
long-term, fixed-rate housing loans by launching operations to support securitization
(acquisition-type) at the Housing Loan Corporation. Assurance-type operations
were launched in October 2004.
Measures to enlarge such operations will be aggressively conducted
in the future as a pillar of operations of the mortgage support organization. |
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| [Scheme of securitization support
operations (Agency conduit model)] |
| * MBS is the abbreviation
of "Mortgage Backed Securities" |
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