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The great housing bust in Britain.

The once promising British mortgage-backed securities market has hit upon hard times. Disastrous monetary policy, high unemployment and plummeting home prices have dashed hopes that this market could someday rival America's own.

WHILE BRITAIN'S GUTTER TABLOID PRESS ALL but devoured the flesh of the royal family during what Queen Elizabeth called her "annus horribilis," or horrible year of 1992, little public notice was paid to the equally dour mood of the nation. Indeed, all of Britain seemed to have suffered an "annus horribilis" last year, as the economy, already in recession for three years, feel to its lowest ebb since the Great Depression, hitting the housing sector the hardest. It seemed at times that the last vestiges of optimism that former Prime Minister Margaret Thatcher had brought back to Britain had vanished.

The bleak mood of the nation reached its nadir on Black Wednesday last September 16. That's the day the government of Prime Minister John Major finally took steps to unhitch Britain from Europe's doomed unity wagon by removing the pound sterling from the Exchange Rate Mechanism. That mechanism ties all the major Western European currencies to the ever-strong Deutsche mark and allows them to trade within a narrow band. The political mythology of European union dictates that other countries are supposed to step in and support a weak currency when it falls to the lower end of its trading range. But, Germany's Bundesbank, intent on keeping inflation in check in the face of mounting budget deficits to bail out eastern Germany, made little effort to halt the sliding pound. Instead, all the support had to come from the Bank of England, which had no choice but to keep raising interest rates just to keep its currency within its trading range.

After Black Wednesday, the Bank of England canceled its plans to raise its base rate to 15 percent. It began to crash interest rates, dropping the base rate to 7 percent by mid-November. In January, Major took charge of the economy himself and lowered rates a full point, to 6 percent, with rumors of another full-point drop to come in March. Insiders predict Chancellor of the Exchequer Norman Lamont will be moved to another position in a cabinet shuffle expected this summer.

British mortgage rates are now the lowest in nearly two decades. The beleaguered housing sector hopes that the only way to go is up. "We think we're at the turning point," says Adrian Coles of the Building Societies Association, whose members hold nearly two-thirds of all mortgages.

After four bad years, the longest and deepest housing downturn since World War II has pummeled house prices so badly that 1.2 million British households, 12 percent of those with mortgages, have negative equity. Repossessions are 13 times their historic averages and an army of 3 million unemployed haunts every mortgage holder and potential first-time homebuyer.

The blow to mortgage originations funded by mortgage-backed securities has been severe. That market, which financed as much as 15 percent of all new mortgages at its peak in the late 1980s, collapsed entirely last year. Most centralized lenders ceased originations and have no idea when they will resume. The centralized lenders, which receive mortgage applications entirely from third parties and have no retail offices, rely almost entirely on securitization to fund the mortgages they underwrite. There have been no new issues for more than half a year. There are some bright spots, however. One major centralized mortgage lender, Household Mortgage Corporation (HMC), and a smaller one, First Mortgage Securities (FMS), have survived unscathed the Darwinian market forces that have rocked the housing sector.

Robert Weir, head of Treasury operations at HMC, is upbeat about the future. As far as he is concerned, the revival of the market for mortgage-backed securities has already begun. "We're through the recession. We're seeing increasing activity in housing," he says. Neither mortgages nor mortgage-backed securities in Britain have any government guarantees similar to those in the United States. In fact, before 1987, there was no securitization of mortgages at all. The idea was basically imported from the United States by Salomon Brothers and other American firms and adapted to conditions in Britain.

For the mortgage-backed issues themselves, the experience has been brighter, but not without serious problems. First and foremost, there has been no defaults. On the other hand, mortgage-backed issues have suffered credit downgrades from their original triple-A ratings to double-A and single-A ratings, mostly on declines in the ratings of insurance companies that offer credit enhancement to the securities. Only a few offerings have suffered declines in their credit ratings because of a deteriorating pool of loans. This is the case, even though the book of securitized mortgages probably has higher delinquencies and defaults than the general mortgage market. Most of the issuers disallow the publication of data on delinquencies and defaults, so it is difficult to find reliable data.

Mortgage-backed issues have survived relatively well because they were structured to withstand severe stress. Standard & Poor's, which advised many of the first issuers, developed a stress model as its worst-case scenario.

"What the experience so far has done is to get the concept of securitization better understood and more widely accepted," says Lionel J. Marsland-Shaw, who analyzes structured finance at Standard & Poor's. In spite of the current woes, he says, "I think the market will come back. The market is here to stay." It may, however, return on a smaller scale than it played in the late 1980s, he adds.

What sent Britain down the road to its housing disaster? It originated in the macro-economic policies of former Chancellor of the Exchequer Nigel Lawson, who began to use interest rate policies as a way to have the pound sterling shadow the Deutsche mark. This policy reversed Thatcher's wary attitude toward Germany and Brussels, home of the European Community, and began the process of moving toward joining the Exchange Rate Mechanism. The plan was that later, Britain, like other European nations, would abandon the pound for a new common European currency in an act of monetary union, a union sanctioned in the Maastricht Treaty. Lawson was also shadowing the mark to overcome the mistakes he had made in expanding the money supply too fast after the stock market crash of 1987, an overreaction that refueled inflation.

Cure worse than the disease

As things turned out, Lawson's interest rate cure was worse than the inflationary disease he sought to mitigate. It started Britain on the road to recession even as the rest of Europe continued to grow modestly. When Lawson's successor Norman Lamont convinced Prime Minister Major in 1990 that Britain should formally enter the Exchange Rate Mechanism, the stage was set for the housing disaster that ensued.

As interest rates continued to rise to prop up the pound, and the economy continued to falter, housing prices plunged 10 percent nationwide and as much as 30 percent in London and Southeastern England. The latter areas had benefited mightily from Thatcher's Big Bang of 1986, when the financial sector was broadly de-regulated and the City of London, the financial district, boomed like never before.

The housing sector is extremely vulnerable to interest rate swings in Britain precisely because nearly all mortgages are adjustable-rate mortgages, some of them adjusting on a monthly basis. Thus, as Britain held on to its newly embraced vision of European unity and its membership in the Exchange Rate Mechanism, mortgage payments doubled for some homeowners, and the housing sector slowly began to crumble. At the same time, Lamont, with questionable judgment, persuaded the Major government to reduce tax advantages granted to mortgage holders. A move intended to reduce the nation's growing budget deficit, it exacerbated the housing price decline.

The result of all this fiscal and monetary mayhem, in the gilded offices of the Chancellor of the Exchequer and the Bank of England, was inevitable. "The housing market was decimated and the mortgage market has been severely dislocated," says Marcia Myerberg of Bear, Stearns & Company, Inc., who led Salomon Brothers' initial effort to introduce mortgage-backed securities to the British market in 1987.

Because there is a dearth of appropriate official statistics, it is difficult to measure the exact extent of the damage done. Available data and some educated estimates give some idea of what has transpired. The volume of housing sales has fallen an astounding 50 percent from the peak level of 2.1 million in 1988, to 1.1 million in 1992, according to the Council of Mortgage Lenders, which includes building societies, clearing banks, centralized lenders and insurance companies, all of which write mortgages. Building societies, which are non-profit savings and lending organizations, have long been and remain the strong financial backbone of British housing finance. Building societies hold an estimated book of 210 billion pounds out of the total British market of 330 billion pounds.

Repossessions mushroomed

The statistics that pour out of the Council of Mortgage Lenders in London paint a stark picture. Repossessions are a key statistic. They totaled only 3,480 back in 1980, representing a tiny 0.06 percent of the market. During the late 1980s, the number began a startling climb, jumping from 26,390 in 1987 to 75,540 in 1991. The repossession rate peaked in 1991 at 0.77 percent, nearly 13 times the 1980 rate. In 1992, repossessions declined to 68,540, 0.70 percent of the total 9,922,000 mortgages tracked by the Council of Mortgage Lenders, primarily because of forbearance on the part of the building societies, under pressure from the government.

The level of repossessions is only the tip of the iceberg of potential massive defaults that lurk beneath the surface of this turbulent mortgage market. The most important statistic, the number of mortgages at least one month in arrears, is not even collected by the Council of Mortgage Lenders. The council's data on arrears begin only after six months, by which time the chances for repaying the past due balance have been greatly reduced.

Estimates of the level of 30-day delinquencies vary wildly, but they are all at staggering levels, somewhere between 15 percent and 25 percent. Regardless of which estimate one accepts, if only one-tenth of those now delinquent were to default, it would be catastrophic to the housing market, sending house prices plunging even more.

There is still danger that the recovery will not proceed fast enough to prevent some of this danger from being realized. As Mortgage Banking went to press, unemployment was still rising in Britain, officially reaching beyond three million, or more than 10 percent of the work force, a level not seen since Thatcher struggled to bring down inflation in the early 1980s. Unofficially, unemployment may be as high as four million.

Prices could skid more

There is also worry, too, that the housing prices have not hit bottom. There are an estimated 250,000 unsold houses on the market. Last November, the Major government tried to put a dent in this overhang by authorizing the Housing Corporation, an official body, to buy up to 25,000 unoccupied, unsold houses to reduce the downward pressures on house prices. This, however, can make only a small dent.

Except for the interest rate declines, other Major housing initiatives have had inconsequential results. The danger of the huge overhang of unsold houses persists.

Optimists like to point out that few first-time homebuyers have entered the market in recent years. They represent a source of growing pent-up demand, according to William E. Grady III, head of European structured finance for Salomon Brothers in London. A British government official estimates that in a typical year, there are about 130,000 first-time homebuyers. If this pent-up demand were to be suddenly unleashed, it would sharply reduce the level of unsold houses. But young people are the hardest hit by the high unemployment rate and may feel the most insecure about buying a home until their confidence in the economy is restored.

A modest renewal in house price inflation would help the market, according to Kenneth Cox, director of Baring Brothers & Co., Ltd., a private investment banking firm that underwrites mortgage-backed securities. The falling pound is pushing up the price of imported goods. And, because Britain relies heavily on imported consumer goods, that will push up the inflation rate, helping ease pressure on the housing sector.

Perhaps the key to how well Britain emerges from its housing bust is the behavior of homeowners who now have negative equity, a Damocles sword hanging over the housing sector. Unlike the housing price slump in the inflationary 1970s, where declines in real values were greater than in the current recession, the current decline in house prices is occurring in an environment of low inflation. Thus, when prices are reported down by 30 percent, it's 30 percent in nominal terms. Factoring in inflation, the declines in real prices are actually larger.

The inability of inflation to bail out the housing industry poses dangers for all mortgage lenders in Britain. The Bank of England has estimated that 1.2 million homeowners--12 percent of the owner-occupied houses that have mortgages--have negative equity. If only 10 percent of those with negative equity dump their houses on the market, it would drive up the unsold housing inventory by another 120,000, sending prices on another downward spiral.

Generous government subsidies

The impact of the housing bust has been greatly mitigated by the government's exceptionally generous subsidies to unemployed homeowners. The government pays half the interest during the first 16 months of unemployment and then pays all of the interest after that. Last year, under pressure from the building societies, the government began to pay the mortgage interest directly to the lender rather than to unemployed homeowners. The cost of the subsidy for homeowners tracked by the Council of Mortgage Lenders is estimated at 950 million pounds for 1992, when 400,000 claimants, 4 percent of the nation's residential mortgage holders, received benefits. This year, the cost of the subsidy should be at least 1 billion pounds, because unemployment is rising. This subsidy is one of the major reasons the British budget has gone from a surplus in the Thatcher years to an enormous deficit that represents 8 percent of the gross domestic product (compared with 5 percent in the United States).

Nearly all of Britain's depository institutions seem to have weathered the housing bust fairly well so far, although the building societies have increased provisionings by 60 percent to 2 billion pounds or 1 percent of the value of the mortgages held by the societies. The building societies, which have better-performing mortgages in general, are well able to absorb more losses.

The picture is not as rosy for the nation's major insurance companies, nearly all of which are deeply involved in primary mortgage indemnity. British insurance firms have lost an estimated 3 billion pounds in claims on defaulted mortgages. As a result, Britain no longer has any triple-A insurance companies.

The effect of these downgrades has rippled throughout the market of mortgage-backed securities, most of which were originally credit-enhanced by insurance companies.

Downgrades of companies such as Sun Alliance and Eagle Star, which have insured mortgage pools against default, have led to wholesale downgrades of mortgage-backed securities from triple-A to double-A by the credit rating agencies. According to one informed player in the mortgage market, the insured pools have suffered foreclosure rates of 7 percent to 9 percent of the pool with a similar percent in arrears but not yet defaulted. That level of financial pain is surely taking a toll on the insurance companies that have insured the pools.

Insurance companies have responded to the crisis by raising their premium rates and insisting on sharing with lenders 20 percent of any loss above 75 percent of loan-to-value. The downgrades, combined with sharply higher interest rates, brought the already-depressed level of mortgage originations for centralized lenders to a virtual standstill. Since then, declines in interest rates and a growing acceptance of new senior-subordinated structures for mortgage-backed securities have increased chances that the market will soon begin its revival. Weir at HMC predicts his firm will originate a book of more than 500 million pounds this year, most in the second half. First Mortgage Securities is also well positioned to resume writing business.

Beached whales

Most of the other centralized lenders are like beached whales--still breathing but unable to wriggle back into the ocean of new originations. Some of the firms left high and dry include The Mortgage Corporation, the centralized lender owned by Salomon Brothers, which was a major force in creating the market for mortgage-backed securities. Bear, Stearns Home Loans, Ltd., the mortgage arm of Bear, Stearns, also has stopped writing new business, although it still is involved in securitizing mortgage business underwritten by third parties. Also sidelined is Mortgage Express, owned by Trustee Savings Bank, which is doing no new business. Perhaps none has fallen faster and harder than National Home Loans Mortgage Corporation.

National Home Loans expanded too rapidly in the late 1980s and early 1990s and moved into other areas such as consumer loans and leasing besides its traditional mortgage business. Along with many other lenders, it suffered from the poor quality of much of its loan book, which was written aggressively at the top of the market. It relied heavily on the banking market for funding because it had not been fast enough in securitizing its very rapidly growing book in 1990. Its banking arm, National Mortgage Bank, suffered a liquidity crisis following the BCCI collapse, as local governments withdrew funds from any but the most traditional banks. As a result, National Home Loans has effectively been in the hands of its bankers, who are owed some 700 million pounds.

The upheaval in the mortgage market has scrambled the roles of the major players. When the housing market was booming in 1987 and 1988, the building societies lost ground for their competitors at the clearing banks and to the centralized mortgage lenders. The building societies' market share of originations, traditionally around 80 percent, fell to 51 percent in 1987, according to Coles of the Building Societies Association. The competitors were able to offer lower rates and better terms because they obtained their funds either in the wholesale market or by securitizing. Building societies, which can fund up to 40 percent of their requirements in the wholesale markets, are generally reluctant to borrow to finance their mortgage operations, although some have done so.

Building societies also have legal authority to sell pools of mortgages into the secondary market, but during the last housing boom, they did not have the technology and personnel in place to enter the market. In contrast, the centralized lenders were very innovative, offering "fixed-rate" mortgages, which were usually fixed for only a year or two, but which attracted a lot of attention. Centralized lenders were also eager to offer what are called "low-doc" mortgages, an enthusiasm that would come back to haunt them, as well as mortgages with loan-to-value ratios above 80 percent. The stock market crash in October 1987 sent funds pouring into the building societies in 1988 and thereafter. A huge build-up in deposits gave the building societies a cost advantage over their competitors as interest rates began to climb, raising the cost-of-funds for both clearing banks and centralized lenders.

By 1989, the building societies were well into their comeback, gaining 76 percent of new originations. By 1991, they reached 91 percent, according to the Council of Mortgage Lenders, virtually eclipsing all the other participants. The building societies even adopted some of the innovations of the centralized lenders, including "fixed-rate" mortgages that fix rates for only two to seven years then revert to adjustable rates. Only with the decline in interest rates have the banks begun to take renewed interest in the mortgage market, as their cost-of-funds became more competitive with those of the building societies. In the last half of 1992, the building societies' share slipped to 84 percent. Because most of the centralized lenders were flat on their backs, much of the loss in market share by the building societies came from increased mortgage business at the clearing banks.

In late January, HMC signaled the battle had been joined again by the centralized lenders by offering a mortgage rate below that of the building societies for the first time in years.

An MBS revival?

What, then, is the potential for a revival for mortgage-backed securities? The bond underwriters, who have highly paid personnel and expensive computer systems in place to handle the securitizations, are very optimistic. William E. Grady III of Salomon Brothers expects the volume of mortgage originations to be the key to the market's revival. He is convinced that pent-up demand can drive a dramatic rebound in the market.

Marsland-Shaw at Standard & Poor's is more circumspect. "You will not see the expansion of 1989 and 1990," he says. The volume of mortgage originations that will be securitized is unlikely to reach that level again, he predicts. The reason is that the rationale for mortgage-backed securities is not the same as in the United States, where it is driven by a government guarantee. The British market is privately driven and will, therefore, develop far more cautiously and far less broadly.

The current outlook contrasts mightily with the hopes of the mid-1980s. Back then, securitization enthusiasts from the United States had visions of duplicating the success of the American market in Britain. Veterans from those days are far more sober about the potential now. "It will be some time before there are a lot of originations," says Myerberg of Bear, Stearns.

Ultimately, securitization will have to catch on at the clearing banks and the building societies if it is to play a significant, ongoing role in the market. Few British banks have had mortgage-backed issues. Barclays is an exception. The large number of foreign European banks in London that have entered the British mortgage market have not tried securitization in any major way either. Only the Bank of Ireland has had major issues. If clearing banks decide to securitize, they are probably going to be interested in securitizing consumer assets such as auto loans and credit card receivables, not mortgages. That's because the other assets count 100 percent against their capital and the banks can reduce downward pressure on their capital ratios by getting some of these loans off the books. Mortgages, on the other hand, are in the 50 percent risk-weight category for capital purposes. So naturally there is more interest in securitizing other assets that are greater capital burdens to keep on the books in unsecuritized form.

The insurance companies might also expand their limited foray into mortgage-backed securities. At least two have already dabbled in the business, including Legal and General Mortgage Services, a subsidiary of Legal and General Insurance Company, and London & Manchester, which has done some structured finance through the banks but has made no public offerings.

It seems that the future of mortgage-backed securities will ultimately rely on just how involved the building societies choose to be in the market. Marsland-Shaw at S&P believes that the building societies will "in time" be interested in securitization. He reports that a few are quietly putting together teams to handle it, along with the necessary computer systems. They will enter the market when it makes economic sense, he says. Because they are able to borrow up to 40 percent of their funding from wholesale markets, they will not be hard-pressed for additional funding sources in spite of no growth in their deposit base in the last year.

Even so, Weir at HMC points out that the building societies may find securitization preferable to borrowing wholesale, because they do not have to repay the balance of the borrowed funds in one lump sum after the notes come due. "With securitization, there's no cash crunch to face, as funds come in over the period of the loan to pay the note holders," Weir says.

The disappearance of the triple-A insurance market may not be a great obstacle to the return of the securitization market. Highly rated American monoline insurance companies are reportedly scouting around London, seeking to enter the business lost by the British and other European companies. One of those looking is the Federal Guaranty Insurance Corporation (FGIC), which is owned by General Electric's Capital division. The preferred offering structure now is senior-subordinated, with a cash cushion dedicated to any possible defaults. "These structures are less likely to be downgraded," says Cox at Baring Brothers.

The senior-subordinated structure is more appealing than earlier structures to Roger J. F. Little, director of treasury services at Abbey National, a major building society that converted to a clearing bank but remains focused on the housing market. Abbey National is the largest single holder of British mortgage-backed securities. Little says Abbey National was attracted to the securities because "the underlying asset was something we felt familiar with--no education was required." Education is indeed the key to making these securities more appealing to British and European investors, a number of insiders say. Little finds the 30 to 35 basis points over the London interbank offered rate (LIBOR) an attractive investment. He is also impressed with the protections offered by the structure of the deals. The underlying collateral has, in fact, performed better than the Depression-era models would have suggested, he says. "From a classical point of view, we're pretty satisfied."

Cox at Baring Brothers reports that all the structured finance deals done so far "have withstood the ravages of the mortgage market." All senior notes have paid on time, and 95 percent of junior note holders have been paid on time, Cox says. The one subordinated issue that has been late has caught up on the next interest date. The bottom line is that there have been no defaults to the note holders.

A possible impediment

One possible impediment to the full recovery of the market in mortgage-backed securities is the illiquidity of the market. Downgrades have complicated the liquidity problem, casting good and bad issues into the same lot. The problem is that most older issues do not provide any information on delinquencies and defaults. The information is provided to the credit rating agencies, but they are prohibited from releasing it.

Paul Secchia and Dominic Swan, credit analysts at Moody's, think such information is necessary to improve the liquidity and wider acceptance of the issues. Indeed, most new issues are providing regular reports on delinquencies and defaults. As the number of such issues increases, it will create a two-tiered market, Secchia and Swan claim. The issues with fuller disclosure will be on the high end of this market, and those with no disclosure will be on the low end.

The recovery of the mortgage-backed securities market for the near term may depend ultimately on the ability of the centralized lenders to rebuild their mortgage-origination capacity. Cox, for one, thinks that the centralized lenders may be poised for a quick recovery because they have already taken the full brunt of their problem loans, while the other players have yet to work through their troubles, particularly the building societies. However, among the independents, only HMC and FMS seem ready to rebound. The Mortgage Corporation, once the dynamo of the market, is preoccupied with resolving the problems associated with past mortgages and with getting insurance companies to pay the pool insurance they promised, admits Leroy J. Rothe, chief executive of The Mortgage Corporation.

Rothe reports that he has had some difficulties with Eagle Star over whether or not certain loans were covered by certain pool insurance policies. "We have claims outstanding for as long as a year," he says. In spite of these problems, Rothe insists that The Mortgage Corporation has remained profitable. National Home Loans may ultimately re-enter the market, too, as its parent, BAT Industries, has made major infusions of capital to bolster the firm. Other centralized lenders may never come back.

Critics of the centralized lenders claim they were too lax in their lending practices, allowing too many high loan-to-value mortgages, failing to verify income and allowing too many loans with no income verification at all. Rothe, however, defends the record of The Mortgage Corporation by saying that the number of mortgages that are delinquent 30 days or more is only 18 percent, "no worse than the rest of the market." Key market players estimate the average 30-day delinquency rate for the entire British mortgage market at an astounding 20 percent to 25 percent, suggesting that Rothe may be right.

Rothe blames a lot of the sloppiness on the willingness of some lenders to rely on the life insurance salesmen, who act as mortgage brokers, to underwrite mortgage applications. That policy is loaded with potential for abuse, he says. These salesmen are more interested in selling a life policy than in writing a good mortgage, because their commission is tied to the life insurance policy, Rothe claims.

The system indeed seems designed to encourage bad underwriting. During the housing boom, the insurance salesmen were raising the allowable loan-to-value ratio to as high as 95 percent. Mortgages were given to first-time homebuyers who were just setting up their own business. In short, there were no real controls by the insurance companies on the activities of their life insurance salesmen, a fact that troubles an apparently embittered Rothe, now lamenting the lack of good business practices. "They say they're a nation of shopkeepers, but there's not a businessman among them," he says. The Mortgage Corporation now does its own credit checks and sets underwriting guidelines for the life insurance salesmen.

In contrast, Weir at Household Mortgage Corporation says that his firm thought it had to be more diligent than other mortgage lenders because it did not have a large pool of older, more stable mortgages to fall back on in hard times. He attributes part of the firm's singular success among the centralized lenders to the better quality of its underwriting.

The centralized lenders have few choices beyond relying on other parties, usually life insurance salesmen, to originate their mortgages. Some, however, are experimenting with advertising and phone-in mortgage applications. AT&T, in fact, came to Salomon Brothers and asked the firm to design a mortgage system that could be used over the telephone, according to Rothe. The Mortgage Corporation has since created a phone-in system that can take applications and make a commitment within 72 hours. The firm has had to abandon the phone-in system, however, after a brief trial that swamped the firm with mortgage applications. When the system gets going again, "it will show the building societies you don't need retail outlets" to generate good volume and a good quality of business, Rothe boasts.

Ultimately, any major role for mortgage-backed securities in Britain will depend on some of the building societies embracing them. Coles believes they will give the market a try. So does Weir at HMC. Even though the comparative economic advantage is in favor of issuing floating-rate notes in the wholesale market, the building societies will find that mortgage-backed securities are worth the additional cost, Weir says. Meanwhile, the 5.2 billion pounds in wholesale market notes issued by building societies in 1988 will have to be refinanced this year. With the wholesale market, Weir points out, "all their problems come at once."

What is to be learned from Britain's housing bust? Weir thinks the crisis has shown that "we've got a fundamentally flawed housing finance scheme that's anti-consumer." The U.S. model of fixed rates and widespread securitization is far more stable, he says. Its adoption in Britain, however, is unlikely any time soon because "the whole culture is wrong" in Britain. Homeowners have not yet demanded true 25-year, fixed-rate mortgages and politicians, journalists and the building societies have not yet been convinced of the clear advantages of long-term, fixed-rate mortgages.

Robert Stowe England is a freelance writer based in Arlington, Virginia.
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Title Annotation:UK mortgage-backed securities market
Author:England, Robert Stowe
Publication:Mortgage Banking
Article Type:Cover Story
Date:Mar 1, 1993
Previous Article:The return of the purchase market.
Next Article:View from the secondary.

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