H1 Asset-Backed Securities Issuance Down 19% YoY... Impact of Decrease in Mortgage Loan Bonds

[Asia Economy Reporter Park Ji-hwan] The issuance amount of asset-backed securities (ABS) in the first half of this year has decreased by nearly 20% compared to the previous year. This is due to a significant reduction in the issuance of mortgage-backed securities (MBS) following the end of the government’s low-income安心 conversion loan program last year.

On the 14th, the Financial Supervisory Service announced that the issuance amount of asset-backed securities in the first half reached 35.4 trillion won, down 18.8% (8.2 trillion won) from the same period last year.

ABS refers to securities issued backed by assets such as real estate, accounts receivable, and mortgage loans. MBS, a type of ABS, is issued based on mortgage loans and is handled only by the Korea Housing Finance Corporation domestically.

By asset holders, ABS issuance decreased across the Korea Housing Finance Corporation, financial companies, and general corporations.

The Korea Housing Finance Corporation’s MBS issuance in the first half was 22.8 trillion won, down 20.5% (5.9 trillion won) compared to the same period last year. MBS issuance had significantly increased in the second half of 2019 and the first half of 2020 due to the low-income安心 conversion loan program, but has been declining since. The low-income安心 conversion loan is a policy loan product that allows switching from existing variable-rate mortgage loans to low-interest fixed-rate mortgage loans. The Financial Supervisory Service stated, "The decrease in MBS issuance is attributed to the end of the low-income安心 conversion loan program, which had a significant impact on the increase in MBS issuance the previous year."

Financial companies issued 7.8 trillion won of ABS, down 14.1% from the first half of last year. Banks issued 1.3 trillion won backed by non-performing loans (NPLs), credit-specialized companies issued 3.3 trillion won backed by card receivables and installment finance receivables, and securities companies issued 3.2 trillion won of primary collateralized bond obligations (P-CBO) backed by small and medium-sized enterprise corporate bonds.

General corporations issued 4.8 trillion won of ABS, down 18.4% from the same period last year.

By underlying assets, loan receivables amounted to 24.7 trillion won and accounts receivable to 7.5 trillion won, down 17.8% and 29.7% respectively compared to the same period last year. The decrease in ABS issuance backed by corporate accounts receivable was largely due to the suspension of ABS issuance backed by airline freight receivables this year, following reduced air traffic after the COVID-19 pandemic. P-CBOs backed by low-credit corporate bonds increased by 10.0% to 3.2 trillion won compared to last year.

The total outstanding amount of ABS as of the end of June was 229.5 trillion won, up 4.8% (10.5 trillion won) compared to the end of last year.

This content was produced with the assistance of AI translation services.