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Balance-sheet firms could be left exposed

‘Lenders will be watching to make sure they will not be the only one on the merry-go-round’

Balance-sheet lenders will be forced to move in line with the funding market if further sub-prime mortgage criteria changes are made in order to make sure they are not overexposed, according to Accord managing director Linda Will.

She says that it only takes two or three players to wind down their market presence and then other lenders will be exposed to too much market share.

This comes after GMAC-RFC last week considered withdrawing its sub-prime products over 75 per cent loan to value but decided to keep the present criteria.

Other lenders such as Platform and Mortgages plc have also said that they would be making significant criteria changes, including reducing LTV from 95 per cent to 90 per cent.

Will says: “Balance sheet lenders, in principle, are unaffected by the US sub-prime crisis but we will have to react if securitisation lenders continue to tighten criteria. A lot of lenders will be watching to make sure they will not be the only one on the merry-go-round with high loan to value ratios.”

She adds it is dangerous to be the lender “left holding the criteria baby”.

Will says due to the mass repricing across the market, Accord will be increasing its rates. “We will have to move with the funding market, irrelevant of anything else. If we think we are too exposed, then we will move in line with the rest of the market.”

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