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Crosby Report welcomed

The long awaited Crosby Report has been widely welcomed although many people have expressed concern that the government will not act quickly enough.

Sir James Crosby believes there is a strong case for further government intervention in mortgage finance markets and he makes three key recommendations.

·         Auctioning in 2009 and 2010 £100m of guarantees to be attached to new issues of mortgage backed securities.

·         New standards and transparency to be adopted for new issues of mortgage backed securities.

·         The International Accounting Standards Board to review its fair value accounting principle, i.e. mark to market accounting, so that it is “no longer itself a cause of instability in the financial system.”

 

The Chancellor, Alistair Darling, won’t be reporting on Crosby’s proposals until next year’s Budget. He said: "I share Sir James’s concerns about the availability of mortgage finance. To implement Sir James’s recommendation, the government would need to obtain State Aid approval from the European Commission and resolve some technical and practical considerations but we will proceed to work up a detailed scheme based on his recommendations and seek State Aid approval to proceed."

 

Ray Boulger, senior technical manager at John Charcol, commented: “It is unfortunate the British government has delegated to the European Commission the power to dictate whether or not we can support our domestic mortgage industry in the way deemed most appropriate by Westminster. It is also unfortunate that as a consequence the Chancellor apparently feels unable to indicate when he expects to be in a position to start offering the guarantee scheme.

 

“Lower interest rates are likely to stimulate additional demand for homes in the New Year and it will be unforgivable if the Chancellor’s lack of urgency in implementing the key Crosby proposal to guarantee new mortgage backed securities stalls the long awaited and much needed improvement in activity in the housing market.

 

“Bearing in mind The Crosby Report has been months in preparation and The Treasury will no doubt have seen this key recommendation in drafts well before now it is a pity action was not taken to allow an announcement that the scheme had been agreed and that the first auction would be no later than early January next year.”

 

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Date: 26th, November, 2008

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