ABS sales in S. Korea surge in 2015 on relief loan policy

Sales in South Korea of asset-backed securities (ABS) surged last year as a government policy to swap short-term, floating-rate mortgage loans with long-term, fixed-rate ones increased demand for the securitization of loans, financial watchdog data showed Wednesday.

Issuance of the ABS, which securitizes a pool of future cash flows from mortgage loan repayment, reached 83 trillion won (69 billion U.S. dollars) in 2015, up 99.8 percent from 41.5 trillion won a year earlier, according to the Financial Supervisory Service (FSS).

The surge came as the government announced the so-called "relief loan" plan last year to encourage borrowers to shift short-term, floating-rate mortgage loans into long-term, fixed-rate ones as part of efforts to help stabilize the dangerous household loan market.

Banks, which allowed households to transform their loans into safer ones, transferred the loans to Korea Housing Finance Corporation (KHFC) that in turn securitized the loans into mortgage-backed securities (MBS).

The KHFC issued 55.8 trillion won worth of MBS in 2015, becoming the largest seller of ABS last year.

Financial institutions, which include banks and securities firms, sold 19 trillion won in ABS, and industrial firms like airlines and mobile operators issued 8.2 trillion won of ABS last year to securitize their future cash flows. Enditem