Information, Efficiency, and Mechanisms: Research on the Housing Mortgage Market

Author: Wang Chongrun
Publisher:
Publish Date: 2004-11-01
Features: Chapter 1 serves as the introduction to this book. This book examines the impact of information asymmetry on the design of housing mortgage contracts, as well as the role of government intervention mechanisms and information separation systems. In China's housing mortgage market, severe information asymmetry exists, making it difficult for banks to fully understand the creditworthiness of loan applicants. Chapter 2 explores how lenders can use contract design to achieve the goals of screening borrowers and improving information asymmetry under conditions of information asymmetry. Chapter 3 assumes that borrowers are in the leading position in a game-theoretic relationship and constructs a signaling model to analyze the role of housing savings deposits linked to loans. Chapter 4 analyzes the moral hazard in mortgage loans. This chapter also examines a form of moral hazard in housing accumulation fund loans. Information asymmetry and moral hazard undermine the efficiency of the mortgage market. Although the spontaneous actions of economic entities can mitigate this harm, the extent of the mitigation is limited. To further enhance market efficiency, non-market mechanisms such as government intervention and information separation systems must be introduced. This is the issue addressed in Chapter 5. In addition to government intervention and establishing information separation systems among banks, introducing third-party insurance can also effectively eliminate the harm caused by information asymmetry to the mortgage loan market. This is the issue addressed in Chapter 6. Building on the theoretical analysis in the preceding chapters, Chapter 7 discusses how to develop China's housing mortgage loan market from the perspective of reducing information asymmetry. Feasible strategic options include innovating mortgage loan instruments.