To broaden mortgage access, the U.S. government wants to revive the market that brought the economy to its knees, but years of effort haven’t succeeded in rekindling it, the Wall Street Journal reported today. For the eighth straight year, the market for mortgage-backed securities issued by private financial institutions, as opposed to government-backed companies or agencies, was moribund in 2015. The volume of such bonds backed by loans to borrowers with shakier credit histories—known as subprime or Alt-A—fell 36 percent from the previous year to $1.67 billion, according to Inside Mortgage Finance. By comparison, lenders issued $269.1 billion of such bonds in 2003, before the housing boom. Government officials do want private investors to take on a bigger role, and in 2014 the Treasury Department launched an effort with lenders, investors and other mortgage-market participants to diagnose and fix issues restraining the market. An announcement is set for today to outline principles agreed on by many of the major players to lay the groundwork for a new market. Today’s announcement mostly outlines the principles of a “deal agent,” a firm that would look out for investors’ interests as a bond is administered. In the newly created role, the agent would enforce the terms of a mortgage bond and have the power to negotiate changes in terms if needed. Though investors have released the proposal, it will be up to bond issuers and investors to implement the deal agent, which would be paid out of a bond’s proceeds.
