EU mortgage market integration must continue despite sub-prime crisis 

His 27 September paper remarks that market participants, politicians and the general public are questioning how capital markets got into such serious trouble and states that the housing market was the origin of the problems. 

Schäfer says that the US government's response is to consider offering assistance to real-estate owners threatened with insolvency, while Europe is considering action that "if transposed into political measures would probably harm rather than benefit banks and consumers in Europe". 

The Commission's upcoming proposals on the integration of the mortgage market seek to promote innovative, non-standard loan and mortgage products - exactly of the sort which are now "getting battered", Schäfer observes. 

However, he believes that in intending to Europeanise and modernise housing finance, as well as develop the product range in the mortgage sector, "the Commission is basically on the right track". 

Moreover, Schäfer insists that concerns that the rising popularity of non-standard products could pave the way for mortgage crises in Europe are "unfounded", providing that banks are responsible in handling risks. 

He calls for prudential checking and assessment of creditworthiness and credit standing, plus a real-estate valuation, to be "essential prerequisites" for granting mortgage loans. 

Providing that these conditions are fulfilled, "there is no reason for objection to the provision of innovative housing loans," Schäfer states. 

He concludes that the US sub-prime crisis must not be allowed to impair the integration of EU refinancing and secondary markets for mortgage loans. 

Furthermore, the securitisation of internationally diversified portfolios and trading them on secondary markets allows "lending banks to benefit from economies of scale in refinancing and offer a larger range of risk/return combinations to investors," he adds. 

Schäfer claims that an integrated EU mortgage market will give "positive impulses" to the European economy because "easier access to more diversified housing loans has a growth-enhancing effect".