Ever since the financial markets collapsed back in 2008, the residential mortgage securities market, once a main provider of capitol for the nation’s financial institutions, has laid dormant. While there are many reasons for this, including tentative investors wary of wading back into mortgage securities, a recent article from Reuters reporter Al Yoon posits that the biggest factor is the availability of cheaper sources of funding.
Take it away, Mr. Yoon:
Lawmakers, regulators and Wall Street are eager to get the so-called private label residential mortgage-backed securities market going again as a source of credit for a struggling U.S. housing market, and an alternative to programs of Fannie Mae and Freddie Mac that have cost taxpayers dearly. It is the last major securitization sector yet to resume significant issuance since the onset of the financial crisis….
Banks are making solid loans that could be in these securitizations, said Baron Silverstein, a managing director and head of mortgage finance at Bank of America Merrill Lynch. But securitizations, a form of funding, are still more expensive than other avenues like corporate bonds, he said.
“What it comes down to it is more expensive to do a securitization today than to sell corporate debt,” Silverstein told about 100 mortgage professionals assembled by the American Securitization Forum in New York.
