Sanwa Bank is scheduled to close Japan's first securitization of mortgage loans by the end of the month, a deal that could prime the pump for an active Japanese mortgage-backed securities market.

The deal is two-and-a-half times oversubscribed, said Jill M. Zelter, a managing director for Fitch IBCA. If this deal goes smoothly, she said, she expects the Japanese market to yield several billion dollars of mortgage- backed securities issuance this year.

The rating agency has created a model to rate Japanese mortgage-backeds using information on properties, borrowers, and loan terms.

The Japanese residential mortgage market has $1.5 trillion in outstanding mortgages, Fitch said in a report. Most new loans are originated by the private sector. But if the appropriate legislation is passed, the Government Housing Loan Corp., a Japanese government lender, would become a big issuer of securities, Ms. Zelter said.

Government Housing Loan Corp. has been the primary source of mortgage finance in Japan, with a market share of 31%, the report said. But commercial banks' portfolios have been rising as borrowers refinance high fixed-rate government loans for loans with lower initial rates.

The government lender has branches in 13 cities and a network of 900 banks and 200 local governments to lend in its name. It offers long-term, 10- to 35-year fixed-rate residential mortgage loans with lower-than-market rates. The highest loan-to-value ratio offered by Government Housing Loan Corp. is 80%, though other guarantors in Japan offer ratios as high as 100%, the report said.

Other sources of mortgages include employers who provide housing loans as part of company benefits, funds from other public organizations, insurance companies, and commercial banks.

Borrowers primarily obtain mortgage finance through their employers in combination with a commercial bank or Government Housing Loan Corp., the report said.

Japanese consumers are "among the wealthiest and most stable in the world," the report said, citing a gross domestic product per capita of about $31,500, compared with $30,000 for the United States. And Japanese consumers are especially eager to become homeowners, Ms. Zelter said.

Residential mortgage loans are used to build, purchase, or renovate properties. Refinancings are not as common in Japan as in the United States, because of the high cost of re-registering a mortgage, the report said.

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