Project Description

Realizing Stable and Shared Economic Prosperity

The Danish Mortgage Model delivers shared economic prosperity benefiting families, investors, lenders, developers and government, instead of limited benefits skewed to a few stakeholders.

It is also a less capital intensive and stable home financing system. Intermediaries or government are not needed to provide upfront capital to purchase loan portfolios from lenders, to then be repackaged and sold in the capital markets.

The Danish Mortgage Model

How do you benefit?

of all Danish mortgages are funded through the capital markets
billion of publically traded Danish mortgage bonds outstanding; 4x of Danish government securities
days loan application to funding for borrowers
hours for lender to receive funding directly from capital markets
  • Stability during its more than 200 years of history
  • Develops the long term structure of interest rates
  • Provides reference for private issuance debt market
  • Market based pricing for mortgages and other private securities
  • No government funding or guarantees.
  • Private issued “national debt”
  • No government provided mortgage insurance
  • Easier to monitor for risk and compliance
  • Danish borrower and lender incentives are more closely aligned
  • Affordable – 30 year fixed rate
  • Transparent prices, fees and repayment terms
  • 5 days to funding
  • Prepay when rates fall without penalty
  • Protects homeowner equity
  • Offers greater mobility. Not locked in when rates rise – mortgages are assumable
  • Increased sales
  • Expanded pool of qualified home purchasers
  • Funding when needed
  • Lenders know they have funds to provide the mortgage loan. Instead of settlement first then funding, funding first then settlement
  • No pipeline risk
  • Liquidity to make loans
  • Lower risk on balance sheet. No asset liability mismatch. Mortgages rates and maturities match bonds issued in capital markets. Mortgages funded by capital markets not deposits.
  • No interest rate risk. No prepayment risk
  • Credit risk remains with lender, who is best able to prevent /mitigate it. Link to borrower is maintained reducing the likelihood of defaults.
  • Continued with new issuances during financial crisis of 2008. No sharp increase in credit spreads. Stable cost of capital. No bailout was needed. Lenders refinanced borrowers into mortgages with lower outstanding balances, since borrowers have right to purchase bonds at below par, similar to corporate treasurers.
  • No investor losses in 200 years
  • Stable, transparent and liquid source of investment exposure
  • Risk to bond can be traced to corresponding mortgages.
  • Risk comparable to Danish government securities.
  • Bonds are AAA rated.
  • No credit risk.
  • Retains prepayment and market risk
  • Attracts domestic and international institutional investors.
  • Deep market. Largest mortgage bond market in Europe
  • Recognized model at Standard & Poor’s, Moody’s and Fitch

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