mortgage insurance

An arrangement that protects lending banks against the risk of mortgage payment default by the borrower. Mortgage insurance in Hong Kong enables the banks to lend more than 70% of the value of the property without incurring additional credit risk, since the portion in excess of 70% loan-to-value ratio ("LTV ratio") is covered by mortgage insurance. In March 1999, The Hong Kong Mortgage Corporation Limited launched a Mortgage Insurance Programme to provide mortgage insurance to banks in Hong Kong up to a LTV ratio of 85%. The Programme was expanded in August 2000 to include loans with 90% LTV ratio, and in July 2004 to include loans with 95% LTV ratio.