VENICE - The European Commission plans to work together with the European Securitization Forum to form a mortgage funding expert group that will include 20 members representing different parts of the industry.
The new group aims to investigate the obstacles to establishing a unified mortgage market and to facilitate a dialogue between consumers and the mortgage industry, according to Eric Ducoulombier, deputy head of unit retail issues, consumer policy and payment systems for the EC. The remarks were made at the ESF's third annual conference held here last week.
The first meeting is slated for April 5, with a maximum of seven meetings to follow. "We have a challenging task ahead to investigate what obstacles exist for a truly secondary market," Ducoulombier said. "We have the possibility to put forward these proposals to EU member states for voting."
Ducoulombier is optimistic but cautious, explaining that although anything is possible, well thought out EU action is required.
Some of the issues to be investigated include the differences in mortgage interest rates offered from country to country as well as the early repayments of mortgage loans. Ducoulombier said, for example, that mortgages in Germany are all structured with the possibility of early repayment but for mortgages in France and Belgium, early repayment terms are compulsory.
Consumers are increasingly asking for better advice, especially when it comes to more specialized lending products, Ducoulombier added. In some countries, this information must be paid for, while it forms part of an information package in others.
Valuation standards are also going to be put up for discussion. While the access to credit data in some countries focuses on the negative - which means only defaults are reported - other countries, such as the U.K., also list the consumer's positive points.
"Unifying the market is a topic that has been talked about in the past and has recently resurfaced again, but these diverse factors make it complicated to view Europe as one mortgage market," said Ducoulombier.
Also, the EU should have rules governing the transferability and pooling of assets from bank to bank. Another issue is the legal separateness of an ABS vehicle in the case of insolvency.
"We are following this process with no preconceived ideas," Ducoulombier said. "These EU rules before they are proposed are weighted and if it's the case where the costs outweigh the benefits, we will just forget about it."
He added that the EC plans to publish a white paper outlining possible solutions to these different terms in spring 2007.
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