FTAdviser.com

Northern Rock’s 125 per cent loan-to-value Together mortgage range accounted for 70 per cent of its repossessions in the first half of 2008.

I am surprised it is not more and given the lack of assistance these borrowers are receiving, surely an even greater number of Together customers will be repossessed in the months to come.

When asked what is being done for these consumers, who were in negative equity as soon as they signed their contract, Northern Rock’s bosses just point towards the panel of advisers they have appointed.

Mortgage advisers are a special bunch but they cannot do magic and conjure up a reasonably priced 100 per cent LTV plus deal out of thin air.

Northern Rock’s interim results showed Ron Sandler was doing a good job to repay the Bank of England emergency loan.

It has now paid back £9.4bn of the loan leaving the nationalised lender with £17.5bn still to muster, compared with £26.9bn at the end of December 2007.

But as a nationalised lender – Northern Rock is in government hands after all – shouldn’t it show a bit more care for what are clearly its most vulnerable customers?

At this rate its disregard these individuals will come back to bite it on the arse – anyone want to buy a nationalised lender with a mortgage book dominated by high risk consumers? I thought not.

“Northern Rock’s 125 per cent loan-to-value Together mortgage range accounted for 70 per cent of its repossessions in the first half of 2008″ is a very interesting statistic, and will - hopefully - influence lenders in the future.

Members of the public on both sides of the Atlantic will all agree with Sheila Bair, Chairman of the Federal Deposit Insurance Corporation (FDIC), “The signal that we send to our banks is that we want to continue lending. But we want healthy lending. We want good risk management. We want well underwritten loans to credit-worthy borrowers.”

http://www.dsnews.com/view_story.cfm?id=2732

In “Soaring cohabitation risky?” Mike McManus writes:

“Some 6.4 million couples were cohabiting at any moment in 2007, but only 2.2 million married, 700,000 of whom were not cohabiting. Cohabitors had a 23 percent chance of marriage. Grim odds ………. Many couples who cohabit say they are in a “trial marriage.” That is a myth. More than 8 in 10 will break up either before or after the wedding”.

http://washingtontimes.com/news/2008/aug/03/soaring-cohabitation-risky/

The survival rate of first time marriages for couples who did not cohabit first is more than twice as good as for couples who cohabit.

The Boston Globe defended Freddie Mac: “Syron encouraged the Boston Fed’s research department to wade into important, but contentious public policy issues. Perhaps best known was its study of lending discrimination, which found race, not lending risks, driving loan decisions ………. the study helped change lending practices and expand credit to minority and poor neighborhoods. In taking on the issue ……… Syron was virtually alone in the financial industry.”

http://www.boston.com/business/articles/2008/08/06/syrons_side_of_the_story/?page=1

That was clearly commendable. People should not be discriminated against on the grounds of race or neighbourhood. However, lenders need to assess the integrity of borrowers as well as their earnings or other income.

I have raised another issue in an article “Are the Sub-Prime, Northern Rock, Fannie Mae and Freddie Mac fiascos connected with the increase in cohabitation?”

http://www.bloggernews.net/117003

We need to know whether the repossessions are disproportionately against cohabiting couples - as compared with - married ones, not just that 70% of repossessions involve loans of more than 100% of the property value.

The parties who have the information that would enable an answer to be give to this question seem to be very reluctant to provide it.

This is “a contentious public policy issue”, but I don’t think the banks, the media and the politicians can continue to ignore it.

I wonder what effect the Northern Rock’s attitude to TCF will have on our wonderful FSA? No doubt a blind eye will be turned as they are both controlled by the government.

TCF springs into my mind.

The only real difference is that most of the other lenders do not have their borrowers debts all in one basket.

I agree with Martin Evans. These were not 100% and over mortgages and for clients with otehr borrowings on loans who’d built up a deposit rather than reduce the car loan or whatever it was, it meant they could go to a lender proving teh could save a deposit and meet a loan repayment. I think a fair number of Together products would have been as a result of refinancing an unsecured loan to the same lender (northern Rock) as their mai lender.
Nick Gullford’s comments are VERY interesting as thinking abotu the 1 or 2 Together Mortgages, they were nearly all cohabitees rather than married couples. I don’t have a large enough Mortgage presence for my impressiosn to be conclusive, but bearing in mind Nrock will have ALL this info, it would be very interesting to see their statistics on this.
Previously the spread of business across a wide variety of lenders would have meant noone would have had access to all the info, but Northern Rock took such a large market share for a while, I suspect the data could be used very well to identify different risk groups for better loan underwriting in future.
That data in itself could be of monetary value and I would hope that Northern Rock realise the value and ensure it is paid for and not simply given away to someone like Lloyds TSB!

Thanks! Really interesting. I wish i could spend my time on writing articles…just have no time for it.