AMI publishes credit crunch solution proposals

Tuesday, 22 April 2008 9:01 AM

The Association of Mortgage Intermediaries (AMI) has published a white paper presenting proposals to end the ongoing credit crunch in the mortgage industry.

The white paper sets out the causes of the credit crunch, as seen by the mortgage intermediary community, establishes what the impact of the current turmoil will be on firms and borrowers, and provides a series of starting points for addressing the market's problems.

Key among the proposals is the development of alternative sources of capital for the industry, particularly from sovereign wealth funds (SWF), to help lift one of the current constraints.

"It is essential the market comes together in order to find a solution. To that end we propose a joint approach be made to a carefully vetted selection of SWFs with the idea of attracting investment in the UK mortgage market," explained AMI director general, Chris Cummings.

"The group making this approach should be facilitated by the Department for Business, Enterprise and Regulatory Reform (BERR), to help secure confidence in SWF."

Yesterday's Bank of England decision was also welcomed, but does not sufficiently tackle the problems in the UK market, argues the AMI.

"We must also see the Bank of England plans to finance extra liquidity introduced with a long-term focus. A one to two year timescale is insufficient, as we need a long-term solution," continued Mr Cummings.

The AMI is also calling for the creation of a gold standard for mortgage-backed securities (MBS). Establishing such a scheme on a given date would enable certainty within the market and give lenders the ability to re-price back books.

The AMI also suggests assets which could not be traded should be managed by the National Debt Office or the Bank.

"We strongly feel that mortgage market has passed the stage where it is able to heal itself and find a resolution to the current crisis that is why we have taken the decision to publish a white paper calling for outside intervention," said Mr Cummings.

"If the market carries on as it is, consumers will continue to suffer as the availability of suitable products will begin to dry up and the industry will continue to shed jobs at an increasing rate.

"This will open up the potential for a shortage of qualified advisers, at a point in time when they are most needed," he concluded.

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