Securitisation market not in difficulty, says MPLC

Mortgages PLC has rubbished claims of difficulties in the securitisation market.

But the wholly owned subsidiary of US investment Bank Merrill Lynch says two divisions of securitisation lenders are now emerging.

Speaking at the Mortgage Summit in Jerez, Peter Beaumont, deputy chief executive officer at Mortgages PLC, told delegates some of the lenders entering the securitisation market have been naive and this has led to the creation of a first and second division in the securitisation market, which investors are now wising up to.

In May, Rooftop Mortgages saw its rating downgraded, sparking concerns that the entire securitisation market could be adversely affected.

The debate also dealt with the potential effects of the high number of new lenders looking to break into the UK mortgage market.

Mortgages Direct director Peter Gladdy asked whether the glut of lenders straining to enter the market alongside an upturn in debt, bankruptcy and arrears, signalled a return to the heady days of the early 1990s and ultimately a market crash.

Gladdy voiced fears that the current climate would force US lenders to shut up shop and move back across the pond.

But Peter Beaumont dismissed the idea of US lenders des-erting the market. He put the high number of US banks entering the UK market down to their “big swinging dick mentality”, with them seeking to ensure they play in the same growth markets as their competitors.

He says: “The reason all the US lenders are over here is that they have a big swinging dick mentality – as in, I’m in if you are.”

But he also pointed out that today’s market is a lot tougher than it was and cast doubt on how well new players would fare. He warned that established lenders would be unhappy about them stealing market share. Concern is mounting that brokers are shying away from offering equity release products due to the perception of them being high risk by the public and the regulator.

The Financial Services Authority has previously called the market “toxic”.

Chris Cummings, director-general of the Association of Mortgage Intermediaries, says: “The FSA has told me that brokers who do too much equity release are high risk, but brokers who do too little are also high risk. That forces us to ask how many cases a broker should be doing a week.”