grading mortgages
In the UK the Chancellor, Alistair Darling, is proposing to introduce a system of grading mortgages in order to revive the market for securitised mortgages which has been frozen since last summer following the sub-prime crisis. The proposal involves giving a “gold standard” kite mark to mortgages of a higher level of creditworthiness and quality including mortgages with a low loan-to-value ratio. Reviving the market for wholesale mortgage financing – the sale of mortgages by lenders to long-term investors – will provide much needed wholesale finance to lenders and give some stimulus to the housing market. Will the Irish Government be obliged to do something similar for the Irish market? Irish Life & Permanent recently issued satisfactory results for 2007. However there were suggestions that this bank would have liquidity problems later in the year causing its share price to drop substantially.
Alternatively might the Irish Government introduce a U.S. style Government backed agency which lends money to banks in return for mortgage collateral?
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