The European Mortgage Finance Agency, which was formed a year ago to push for a European government-sponsored enterprise to inject liquidity into the mortgage market, is winding down its activities after failing to get support. Accounting irregularities at Fannie Mae and Freddie Mac and ensuing outcries in the U.S. appear to have played a role in nixing the project, officials say.
Funding for the private sector initiative, whose backers include Crédit Agricole, Banco Bilbao Vizcaya Argentaria, Banco Comercial Portugues andIrish Life and Permanent, has almost run out and Rob Thomas, managing director of EMFA, said he won't be asking for more. This effectively ends its lobbying efforts for a European agency that would standardize the selling of bonds backed by mortgages like the U.S. entities do, he said.
Resistance from the European Commission, mortgage bank federations and leading lenders has been stiff, Thomas said. "The key problem is that the people who want an integration of the European mortgage markets are not as vocal as those who see this as a threat," said Thomas, citing the Association of German Mortgage Banks and some of the larger European mortgage lenders as the most vociferous opponents of the project.
Officials at the EC reacted positively initially, but once the project got handed over to the internal markets directorate, support dried up, Thomas said. An official at the directorate said the commission is very focused on issues of integration and a number of studies are underway. It would have been premature to consider the EMFA proposal, which deals with just one aspect of integration, separately from these, he said.
That news of accounting improprieties at Freddie Mac and Fannie Mae surfaced around the time the EMFA went public with its plans certainly did not help, Thomas noted.
Christian Walburg, spokesman for the German mortgage banks, emphasized the U.S. experience demonstrates the downside of setting up duopolistic entities that become extremely difficult to control. Furthermore, given Germany is in the process of removing state guarantees from the Landesbanks, introducing any kind of state guarantee would be untenable, he said.