Another Improvement in the Mortgage Market

The Wall Street Journal writes about yesterday’s $1 billion dollar bond sale:

In a sign of possible improvement in the market for mortgage securities, HBOS PLC, the United Kingdom’s biggest home lender, sold about $1 billion in highly rated bonds backed by mortgage loans Tuesday.

It is the latest indication of what many are saying is the bottom of the credit crunch; other signs include the $750 million sale of an AmeriCredit Corp. unit’s bonds backed by auto loans to risky borrowers.

“This is really the first signs of a greenshoots recovery,” said David Basra, Citigroup’s head of securitized and real-estate markets for Europe, the Middle East and Africa.

When banks are able to sell the mortgages they make to institutional buyers in this way, it frees the banks up to make more loans. The main reason banks aren’t lending as much as they used to is the lack of a functioning secondary market. As the market recovers, mortgage lending will become easier.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s