tony's blog

Tuesday, April 6, 2010

The real test will be to see what has changed by this time next year

First of all, my thanks to all the contributors and attendees at this year’s Mortgage Funding Conference. Initial feedback and coverage has been very positive. My thanks are also due to Sidley Austin for their sponsorship of the event.


I am particularly pleased as the conference was the first of its kind since the credit crunch gripped the industry. My aim is to establish an ongoing collaborative event – a ministry of all the talents if you like - that can highlight, discuss and maybe even resolve the issues that are affecting everyone. From time to time the vested interests of financial services need to put differences aside and pull together so it was gratifying to see all manner of market commentators: lenders, distributors, bankers and regulators in attendance in full voice.

Our overall aim then is simple: to move towards a fully funded and competitive mortgage market underpinned by an increasing number of mortgage lenders ready, willing and able to lend, or to lend more.

The lack of a level playing field was a theme that ran through many conference addresses and perhaps unsurprisingly, the lack of action from the authorities in support of wholesale funding markets and the broad range of mortgage lenders was criticised by many speakers.

My own view is that we cannot expect guarantees in this market from the government. But there are postives, as Robert Plehn, head of structured securitisation and covered bonds at Lloyds Banking Group, noted in his excellent presentation. While a RMBS guarantee scheme set up by the UK had not been able to be put into practice, it did represent a “tipping point” for investor sentiment towards UK RMBS as it demonstrated that the government was willing to act in support of the asset class.

Other highlights included Rob Thomas’ passionate defence of wholesale funding noting that the necessary guarantee of retail savings deposits by the Chancellor had shifted the balance unduly in favour of retail funding. Indeed the FSA is continuing to accentuate this bias in its pursuit of lower wholesale funding ratios as part of their change to bank and building society rules for maintaining liquidity. These actions in isolation never seem as bad as when considered in their totality.

On a positive note we should also welcome the fact that Mervyn King and Lord Turner have recently endorsed the importance the securitisation and covered bond markets: Lord Turner said only last week that “securitisation will continue to play a significant role in the credit intermediation process and ... could perform a socially useful function of enabling improved risk management.”


It seems to me that we are moving on and the high attendance at this conference and positive feedback received proves that there is commitment to diversified and robust funding across the industry in one shape, form or another. The real test will be to see what has changed by this time next year.

One thing is clear: we need more mortgage lenders to be active in the market than there are today and this means getting the funding markets working efficiently again with a diversity of funding sources or we are in danger of markets (and I mean both the housing market and wider economy) wallowing in the doldrums.

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