Much of the securitisation which was used to fund mortgage lending before the credit crisis will not return, says FSA chairman Lord Turner.
Speaking yesterday at a Treasury select committee meeting, Turner was asked if he believed there could be a mortgage market recovery without a securitisation revival. He said: “I think we can have a recovery without securitisation, it will be easier with it but we have to be realistic. Quite a lot of what was previously securitisation was based upon unsafe forms of maturity transformation and is not coming back.”
He said UK residential mortgage-backed securities ending up in the hands of investors seeking short-term profit rather than long-term investors had undermined their sustainability.
He said: “If UK residential mortgages were being securitised and ending up in the hands of natural buyers of long-term assets, then you would have a sustainable non-bank form of mortgage credit intermediation. That is hardly what was occurring at all, almost all the UK RMBS were ending up in the hands of mainly US investors who thought they had a short-term asset.”