A couple of hundred years ago a devastating fire wiped out a quarter of Copenhagen. Keen to rebuild but with personal credit hard to get, wealthy Danes banded together to back a then-novel way to raise funds: issuing bonds against property. Since then, the Scandinavian country has developed something of a unique approach to mortgage financing and the sale of bonds secured by home loans. That’s made the securities a magnet for global investors, even during bouts of inflation.
It hosts the world’s biggest market for so-called covered bonds — debt that’s considered extra-safe because it’s directly secured by a pool of assets. Most of the roughly $450 billion in securities are backed by home loans, making them similar to mortgage-backed instruments issued, for example, in the US, but not identical. While in the US banks bundle mortgages and sell them on, in Denmark specialized lenders sell specific bonds at the request of borrowers who receive the proceeds more or less directly. If a borrower defaults, Danish mortgage banks can take over the collateral in a process that’s much shorter than in many other countries. Danish borrowers also have a much tougher time declaring bankruptcy to get rid of debt.
Why Denmark’s Mortgage Market Lures Global Investors: QuickTake & Latest News Update
Why Denmark’s Mortgage Market Lures Global Investors: QuickTake & More Live News
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Why Denmark’s Mortgage Market Lures Global Investors: QuickTake & More News Today
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