EMF sees no Euro subprime crisis, regulation need

LONDON (Reuters) - Europe does not risk a U.S.-style subprime mortgage crisis and does not need more regulation to protect borrowers or to foster a single regional mortgage market, a top industry official said on Wednesday.

Annik Lambert, secretary general of the European Mortgage Federation (EMF), said lenders across the 27-nation European Union were fearful of possible legislation after the European Commission unveiled plans late last year which might oblige them to offer loans in a so-called responsible manner.

"The industry feels it would be very dangerous," she told the Reuters Housing Summit.

"We are definitely reluctant because as long as there is not a clear and acceptable definition of 'responsible lending' it would be much too dangerous for the lender because it would be much too easy afterwards for the judge to say, you didn't act responsibly," said Lambert, a former lawyer.

She warned the region's mortgage lenders risked getting an imposed, top-down solution if they failed to harmonize their lending policies by implementing a common code of conduct.

The Commission has said several issues needed further study before legislation was introduced in late 2008 or early 2009, including possible ways of promoting responsible lending in the wake of the U.S. subprime crisis.

Lambert said the EMF, which also advises the European Central Bank and Basel Committee on mortgage industry matters, has so far noted little fallout on the 5.7 trillion-euro ($8.4 trillion) European mortgage market as a result of the problems in the United States.

SUBPRIME FALLOUT

The fallout to date had mainly impacted European demand for mortgage debt -- rather than supply -- and would be "contained," although Britain was potentially a unique case.

In the main, those housing markets which had risen fastest for longest -- such as the UK, Spain, Ireland -- were seeing the biggest slowdowns, with only Ireland firmly in the red.

There was also some reluctance on the part of prospective homebuyers in France and Spain to take on new mortgage debt because of concerns over the housing outlook, she said.

But it was too early to assess the fallout for the supply of European mortgage debt even though banks were likely to become more careful, Lambert said.

"The word has been given that they should be more cautious about checking candidate borrowers' circumstances," she said.

But she said bank lending practices in Europe were anyhow already more conservative than in the United States, where some home loans had been granted on the basis of the collateral's value rather than on a borrower's ability to pay.

There were also strict usury rules that capped loan rates in places such as Italy.

The UK -- which accounted for a quarter of Europe's mortgage market -- was a potential case apart because it had "definitely much more" subprime exposure than the rest of Europe at about 8 percent of total mortgage loans. But it was also altogether different to the United States too, Lambert said.

With about 40,000 mortgage brokers, the UK also had a much more competitive and aggressive mortgage loan market.

"No, I wouldn't say 100 percent mortgages were ok but a problem we face is the increasing role of credit intermediaries which are not regulated or checked everywhere and multiplication of brokers which are paid a fee," she said. "(This) is perhaps something we should be looking into."

The advantage of the UK model compared with the rest of Europe, though, was that it was less "patronizing" and more "consumer-friendly" and provided more people with access to credit who might otherwise struggle to raise funds.

She said it was too easy to blame irresponsible lending when it was just as important to borrow responsibly.

(www.reutersrealestate.com for the global service for real estate professionals from Reuters).

(Reporting by William Kemble-Diaz; Editing by Rory Channing)