Sir in “Unsafe as houses”, July 13, you lend support to UK‘s Financial Services Authority’s recommendation to “require independent verification of income” when processing a mortgage… arguing that this will “prevent individual risks from turning into systemic ones”.

Have you already forgotten that it was the independent credit rating agencies with their faulty ratings that provided the largest dose of systemic risk for the current crisis?

Do you really want to create a new oligopoly of information providers, the certified income certifiers, and who without no one will be able to lend? If you really think you need to do that for the creditors, then you are better off prohibiting them from being creditors. This is exactly the same type of nanny requirement that got the markets to trust too much the credit rating agencies.

If you want introduce stricter rules on mortgage lending then you are better off with rules that allow for creditors and debtors to come closer, instead of setting up new toll-bridges.

For instance, the rule that I would require, if a regulator, is that all mortgages, especially those that are to be securitized, have to explicitly name who has all the powers, all of the time and on behalf of all the creditors, to restructure the mortgage if need be; and the creditor must approve any change of negotiator. That by itself would not only solve one of the biggest problems currently encountered in the mortgage market, but also create a moral link that represents much more real skin in the game than a couple of percent of exposure.