The International Monetary Fund is calling for limits on LTV ratios and for higher LTVs to only be made available to those who purchase mortgage insurance.
In the IMF’s Global Financial Stability Report, it argues that European regulators should be handed the power to introduce LTV caps.
It says higher LTV ratios are associated with higher house price and credit growth over time, but absolute LTV limits might be blunt instruments that exclude potentially creditworthy first-time buyers and borrowers.
It says: “Rather, mortgages that do not meet the strict LTV prudential limit could, for example, still be made available to those borrowers who agree to purchase adequate mortgage insurance.
“Alternatively, bank supervisors would need to assign higher capital risk weights for non-conforming mortgages.”
The report also calls for reform of the US housing finance system to address current gaps in the regulatory, supervisory, and consumer protection frameworks.
It says it should aim for better-defined and more transparent government involvement in the housing market, showing relevant items on the government’s budget.
The IMF also recommends it reconsider the role of the housing-related government sponsored enterprises, given the need to create a more level playing field in mortgage markets.
Source: www.mortgagestrategy.co.uk
In the IMF’s Global Financial Stability Report, it argues that European regulators should be handed the power to introduce LTV caps.
It says higher LTV ratios are associated with higher house price and credit growth over time, but absolute LTV limits might be blunt instruments that exclude potentially creditworthy first-time buyers and borrowers.
It says: “Rather, mortgages that do not meet the strict LTV prudential limit could, for example, still be made available to those borrowers who agree to purchase adequate mortgage insurance.
“Alternatively, bank supervisors would need to assign higher capital risk weights for non-conforming mortgages.”
The report also calls for reform of the US housing finance system to address current gaps in the regulatory, supervisory, and consumer protection frameworks.
It says it should aim for better-defined and more transparent government involvement in the housing market, showing relevant items on the government’s budget.
The IMF also recommends it reconsider the role of the housing-related government sponsored enterprises, given the need to create a more level playing field in mortgage markets.
Source: www.mortgagestrategy.co.uk
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