The Hong Kong Mortgage Corp is to lower the minimum required return for residential mortgages it is to buy from banks in a bid to provide them with more flexibility in planning asset sales.
Senior vice-president Pamela Lamoreaux said previously the corporation required each residential mortgage bought to generate a return of at least 50 basis points above its 'net required yield' if the purchases were to be transacted at the mortgage's par value.
However, the corporation would still buy mortgages with a return of less than this minimum at a discounted price.
The net required yield is determined by the corporation with reference to market conditions and negotiations with banks.
In order to provide banks with more flexibility, a bundled approach to this minimum-return requirement will be adopted.
It will require only the average return for a portfolio of mortgages - comprising high and low returns - to be at least 50 basis points above the net required yield.