Some of us might have done things in a different order, but at least the government is trying.
However, we are still not seeing any noticeable increase in residential mortgage lending.
Two things need to happen. The bad bank facility will only work if lenders analyse and understand their existing portfolio.
With complicated purchasing arrangements – where some lenders agreed to buy mortgage portfolios before the loans had been underwritten – many lenders don’t know the risks in their balance sheets.
It is likely that independent analysis will be required for lenders to understand the problems. Having lost the toxic liabilities, we need to see LTVs increase.
It was great to see Nationwide launch a broker-only 95% LTV deal, albeit for existing borrowers, but more deals are needed.
To encourage lenders further, I would like to see a government-backed mortgage indemnity guarantee scheme. If structured correctly, taxpayers could even make money out of such a facility.