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Brokers urge swift response to Crosby

Mortgage brokers are calling on the Government to take immediate action after Sir James Crosby’s preliminary report suggested that the Bank of England’s bail-out scheme could be extended to include new mortgages.

Crosby’s report on mortgage funding, published this week, said the move would encourage new issuance of residential mortgage-backed securities and covered bonds, boosting mortgage lending in the UK.

However, he warned that the Government would need to consider the fiscal, debt management and legal implications of such a move and whether the transfer of risk to the Government would distort incentives and create moral hazard.

The Crosby report also sent out a warning that many mortgage brokers will disappear if the current situation is not addressed due to lower volumes and lenders switching to direct distribution.

The Association of Mortgage Intermediaries says it is disappointed that the interim report did not go further. Director general Chris Cummings says: “As the situation worsens, we will see arrears and repossessions increase. To deliver a stable mortgage market, it is now time for decisive leadership from the Treasury.”

John Charcol senior technical manager Ray Boulger says: “The real purpose of this report should be to come up with a solution. The chances of getting anything done this year looks pretty remote now.”

The report predicts a shortage of mortgage finance will persist in 2008, 2009 and 2010 and believes forecasts for net new lending in the period will prove significantly optimistic.

Other options suggested in the report include a gold standard for mortgage-backed securities and a temporary Government guarantee for the prin- cipal and interest on high quality mortgage-backed securities.

Cicero Consulting says it will hold a meeting next week with around 20 market participants to launch a political campaign in the autumn to press the Government to take action.

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