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Securitisation ‘hindering non-conforming market’
21 April 2007
A speech delivered in US Congress has sparked debate by arguing that securitisation in the marketplace is leading to increased trouble within the non-conforming sector.
Speaking in a Congressional hearing, Sheila Bair, chairman of the Federal Deposit Insurance Corporation, suggested that securitisation was hindering the market. She argued that lenders were unable to innovate due to market restrictions imposed because of securitisation structures put in place by lenders.
She said: “The growth of securitisation in the non-conforming mortgage market has complicated the ability of interested parties to apply flexibility and creativity to assist borrowers facing difficulty.”
She added: “Significant changes in the non-conforming mortgage market in recent years have substantially altered the relationship between borrowers and mortgage lenders.
“In some cases this makes it more difficult to resolve troubled loans in a way that preserves the availability of credit and benefits deserving borrowers, namely, by keeping their homes.”
However, Alex Hammond, PR manager at Kensington Mortgages, disputed the claim that securitisation could hinder the non-conforming mortgage market.
He also suggested that the move would not be mirrored in the UK market, and said: “Securitisation can help provide a safety net for mortgage lenders, and there is still a very real demand for good quality securitisation in the market.”