ID :
19563
Mon, 09/15/2008 - 13:25
Auther :
Shortlink :
http://m.oananews.org//node/19563
The shortlink copeid
Rismark wants nationalised Aussie Mac
(AAP) - Property sector funds management and indices business Rismark International has called on the federal government to introduce an "Aussie Mac" mortgage financing conduit along the same lines as ailing US giants Fannie Mae and Freddie Mac.
But Rismark managing director Christopher Joye said the differentiator for Aussie
Mac would be that it remained in government hands, given that he considered the
demise of Fannie and Freddie to be directly attributable to dominance supplied
through government guarantee.
Speaking on Sky Channel, Mr Joye said that if the two stock market listed mortgage
giants hadn't carried such implicit backing, competitor third-party mortgage
financiers would have been able to develop a more robust and liquid financing base.
He said that given the consistent nature of market shocks - the tech wreck and
recent credit debacle among them - that markets weren't as efficient nor liquid as
exponents maintained.
In particular, Mr Joye pointed out that liquidity pools can not only rapidly
diminish, but were equally as capable of disappearing completely.
"There's a question as to whether Fannie and Freddie were conceived in the right
manner," Mr Joye said.
"They were given this open-ended protected status, and became private enterprises
that dominated the US housing market.
"The nationalisation remedy is required, because one of the intentions of the
nationalisation process is to considerably pare back such activity and allow the
private sector to develop its own financing capabilities."
Mr Joye said his vision for Aussie Mac would be that it ordinarily sat on the
sidelines, and would not actively pool mortgages, repackage them and on-sell the
vehicles to promote liquidity.
Instead, Aussie Mac would lie in wait as a backup in the case of any liquidity crisis.
Third-party mortgage providers would meanwhile be able to build more robust
financing models, thereby expanding the mortgage universe while spreading risk.
"Fannie was established in 1938, but it was privatised in 1968 and Freddie Mac was
set up to compete with Fannie," Mr Joye said.
"In the absence of government intervention, I think we would have had a cataclysmic
crisis.
"They had the support of the government if an emergency were to arise, and that
emergency has materialised and the government has stepped in."
Mr Joye said the key problem in the US was the wide availability of "non-recourse"
loans, which allowed lenders recourse to underlying property, but no other assets
held by mortgagees.
When borrowers couldn't service their mortgages, lending dried up and prices
plummeted, and properties repossessed by lenders were worth less than their original
loans.
But Rismark managing director Christopher Joye said the differentiator for Aussie
Mac would be that it remained in government hands, given that he considered the
demise of Fannie and Freddie to be directly attributable to dominance supplied
through government guarantee.
Speaking on Sky Channel, Mr Joye said that if the two stock market listed mortgage
giants hadn't carried such implicit backing, competitor third-party mortgage
financiers would have been able to develop a more robust and liquid financing base.
He said that given the consistent nature of market shocks - the tech wreck and
recent credit debacle among them - that markets weren't as efficient nor liquid as
exponents maintained.
In particular, Mr Joye pointed out that liquidity pools can not only rapidly
diminish, but were equally as capable of disappearing completely.
"There's a question as to whether Fannie and Freddie were conceived in the right
manner," Mr Joye said.
"They were given this open-ended protected status, and became private enterprises
that dominated the US housing market.
"The nationalisation remedy is required, because one of the intentions of the
nationalisation process is to considerably pare back such activity and allow the
private sector to develop its own financing capabilities."
Mr Joye said his vision for Aussie Mac would be that it ordinarily sat on the
sidelines, and would not actively pool mortgages, repackage them and on-sell the
vehicles to promote liquidity.
Instead, Aussie Mac would lie in wait as a backup in the case of any liquidity crisis.
Third-party mortgage providers would meanwhile be able to build more robust
financing models, thereby expanding the mortgage universe while spreading risk.
"Fannie was established in 1938, but it was privatised in 1968 and Freddie Mac was
set up to compete with Fannie," Mr Joye said.
"In the absence of government intervention, I think we would have had a cataclysmic
crisis.
"They had the support of the government if an emergency were to arise, and that
emergency has materialised and the government has stepped in."
Mr Joye said the key problem in the US was the wide availability of "non-recourse"
loans, which allowed lenders recourse to underlying property, but no other assets
held by mortgagees.
When borrowers couldn't service their mortgages, lending dried up and prices
plummeted, and properties repossessed by lenders were worth less than their original
loans.
