Abstract
Because of the serious M-shape income distribution and the threat of housing bubble, borrowers undertake heavier burden and have to postpone or give up the decision of buying house. In this way, there is excess supply in housing market. The government would like to solve the unbalanced housing market, so Construction and Planning Agency Ministry of the Interior (CPAMI) draws up the draft of mortgage insurance to provide some settlements. Mechanism provided is to enhance housing affordability with credit enhancements, but it does not affect the stability of the banking system and it will also allow banks to give a higher loan to the value. Both borrowers and banks are in a win-win situation. The purse of the research is to investigate Taiwan’s mortgage insurance premium structure by mortgage competing risk model proposed by Lin and Yang (2005), considering default, prepay, curtailment and delinquency.