The majority of housing experts see little hope for the American mortgage market unless the government pledges to repay lenders.
A recent report stated:
“For the foreseeable future, there is simply not enough capacity on the balance sheets of U.S. banks to allow a reliance on depository institutions as the sole source of liquidity for the mortgage market.”
The report, entitled “Housing America’s Future: New Directions for National Policy,” was issued by a group of members of the housing establishment.
According to the panel, this is not an indictment of the American banking system, because it would prefer to trade leveraged derivatives then hold on to mortgage loans.
The report adds, “Given the size of the market and capital constraints on lenders, the secondary market for mortgage-backed securities must continue to play a critical role in providing mortgage liquidity.”
Investors are unlikely to to finance mortgages without a government guarantee.