Stewart made the claim at today's CML future housing conference in London in response to a speech made earlier in the day by Lloyds Banking Group's Michael Vennard.
Vennard suggested that lenders should mitigate risks with partnerships saying: “We need to have a greater acceptance of shared ownership. As affordability gets to the pinch points as it is in London and the South East, we will get to that point where people can’t afford 100% ownership and we will have to go down the line of shared ownership.”
Vennard continued to cite the various forms of shared ownership in which a housing association and the bank of mum and dad would act as guarantors to provide access to above 95% loan to value products.
But Stewart hit out against this idea during his time on the podium. He said: “I don’t mean to be rude but lenders are into the business of lending and that’s a risky business. Developers need to build houses and that’s an even riskier business. For lenders to be looking for ways to mitigate risk, I find that very unsatisfactory.
“The bank of mum and dad and local authorities will have to do their parts to take on the risk for now however I don’t see that as sustainable.”
Stewart proceeded to suggest that mortgage indemnity guarantees would be the solution.
He said: “The industry needs a MIG as unless it works, we won’t be able to have a way to get developers into building homes.
“I spoke to a senior lender at a dinner and he said not to talk to him about MIGs as back in the ‘90s they all went bust or they didn’t pay up due to exclusion clauses. We need to find a MIG that works.”
Vennard also mentioned MIGs in a previous session as an area which needed to be focused on.
He said: “MIGs is one of the potential growth areas. The issues we’ve had in MIG insurance has been the post-event underwriting going on with MIG insurance and lenders.
“That experience put wind up the Financial Services Authority a little bit in terms of “is this insurance really as secure as it is?” and the evidence is pointing to the fact that it isn’t. So it now seems as if it isn’t as secure as other forms of indemnity.
“There’s some work to be done to the MIG insurance in terms of tightening up the clauses and sorting out the underwriting. It’s hardly innovation it’s just tweaking what we’re already use to.”
