Indonesian secondary mortgage market study

The paper begins with a review of the approaches used to finance owner-occupied housing and a definition of the concept of a secondary market. A secondary market is seen as a solution to the problem of insufficient lending by primary market institutions. The appropriate organization of the secondary market depends on the specific reasons why primary market lenders are not providing sufficient funds to meet demand. Secondary mortgage markets exist in a variety of forms in different countries. The study briefly reviews the experience with such markets and identifies the requirements for their successful operation. The feasibility of a secondary mortgage market in Indonesia is evaluated through a review of the primary market conditions. The major conclusion of the study is that a secondary mortgage facility could significantly improve the allocation of credit by reducing the liquidity risk for primary market lenders and increasing the flow of funds from long-term sources of capital (e.g., pension funds). (Author abstract)