Abstract
Indonesia is struggling to promote decent home-ownership to its people. Rapid urbanization and over population has increased the urgency to tackle the home-ownership problem. Housing backlog keeps on increasing while housing supply is stagnant due to the inefficiencies of the housing finance market. This sector is dominated by banks which use short-term financing to fund long-term mortgage loans, resulting in the maturity mismatch problem. The Indonesian government has recognized this problem for a long time, yet unfavorable economic situation has been an obstacle to create a solution. After the Indonesian economy fully recovered from the effect of the Asian financial crisis in 1997-98, the government finally sanctioned the nation’s first secondary mortgage corporation. This company was formed in 2005 and has been actively providing liquidity facility to the primary market and also engaged in mortgage securitization. Despite the absence of securitization law, the company has successfully issued Mortgage-Backed Securities (MBS) through an alternative securitization mechanism. Indonesian secondary mortgage market is still in infant stage, since the government has not been fully proactive in developing the infrastructure it needed to grow. Legal issues are the biggest obstacle in its development. Therefore, the government has the final word on the fate of the secondary mortgage market.