BlackRock Inc., the world's largest money manager, plans to approve 10 lenders this month to feed its program to expand residential mortgage credit beyond the U.S. government market, said Randy Robertson, managing director and co-head of securitized products.
One lender is already considering "jumbo" loan applications under BlackRock's program geared toward such "non-conforming" mortgages that don't qualify for federal guarantees, he said.
Restoring the flow of private capital to the $11 trillion U.S. mortgage market is fueling the buzz at the conference of the American Securitization Forum, a lobbying group for the industry whose funds once provided the lion's share of money for home buyers. Private capital has been thin since 2008 due to housing market uncertainty, increased regulation and competition from government-backed programs.
A push to reduce government support of the mortgage market is growing as Congress and the Obama administration work to reform the system. They want to protect taxpayers who have shelled out some $150 billion to cover losses at U.S. funding giants Fannie Mae and Freddie Mac. The administration is considering a cut in government support for the mortgage market. See
BlackRock's capital and infrastructure will be ready when mortgage demand rises, Robertson said in an interview on Monday.
Regarding new loan originations, BlackRock "will take what the market is able to produce that meets our quality guidelines," he told Reuters at the conference.
"It's still unclear what housing reform will look like," he added. "But most people have the conclusion government participation will be smaller, not larger" and private capital must fill the void, he said.
The mortgage market in 2010 was 88 percent dominated by government funding or guarantees, according to Inside Mortgage Finance. Market share was as little as 30 percent in 2006 after lenders had loosened underwriting to boost volume and feed demand for private-label mortgage bonds.
As mortgage bonds have created mayhem for the financial markets, BlackRock wanted a new model. Previous weaknesses, including sloppy loan documentation and conflicts of interest when the same bank is originator and servicer, would be resolved in the new securitizations.
Investors have said unfair treatment has been a factor in the lack of private capital entering the housing market, which is foundering in part due to lack of credit. Only one mortgage bond backed by new loans has been sold since the $1.5 trillion private-label market came to a screeching halt in 2008.
Most ASF members surveyed ahead of the conference said BlackRock and other non-bank issuers such as Redwood Trust would share the private mortgage bond stage with the older model, of lenders securitizing their own assets.
Demand for capital still isn't large now as foreclosures are creating a new downdraft to home prices nationally, said Robertson, who agreed with several Wall Street predictions for another 5 percent to 10 percent depreciation.
What's more, "it's been a tough winter," he said, of frequent storms across the nation. "To get a good indication of what volume trends look like, we'll have to wait until May and see the data. Demand should pick up as people typically relocate during the summer months."
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