Friday, October 13, 2006
[RealEdge] TodayOnline : MAS may allow banks to insure mortgages to manage credit risk
 This story was printed from TODAYonline | |
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| MAS may allow banks to insure mortgages to manage credit risk Friday ? October 13, 2006 The Monetary Authority of Singapore (MAS) is considering allowing banks to insure mortgages in the event of a default. This follows its decision last year to increase the maximum that one can borrow to buy a home to 90 per cent of a property's value from 80 per cent. With buyers putting down smaller deposits, insurance will help banks to manage the greater credit risk. The MAS feels that professional mortgage insurers can help in the bank's assessment of credit risks. This move may also assist in the development of mortgage-backed securities and add to the variety of financial products being offered in Singapore and boost its growth as a financial centre. However, with the introduction of mortgage insurance, there is a need to regulate and supervise mortgage insurers to avoid regulatory gaps in the financial system. The MAS is proposing to regulate the business based on the framework for general direct insurers, with additional requirements to address risks specific to the mortgage insurance business. Among the proposals, it is recommending that mortgage insurers be required to operate as mono-line insurers to reduce the risks of insurers becoming insolvent. The MAS is also proposing that certification of mortgage insurers' policy liabilities be carried out by an actuary approved by the MAS. In addition, approved actuaries may be required to make explicit allowance for, and disclose in their valuation reports, key risk drivers such as the probability of default. Furthermore, mortgage insurers will not be allowed to deal directly with borrowers in the loan-origination process. Details of the consultation paper are available on the MAS' website. The MAS is inviting feedback to the proposals by Nov 15. ? Channel NewsAsia | |
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// posted by Shajahan @ 6:20 PM 