Monday, May 12, 2008

Your tax money at risk

Northern Rock overstated quality of its mortgage book

Northern Rock's former directors overstated the quality of its £100bn mortgage book by using "inadequate" controls that have left the taxpayer more exposed to a housing downturn than previously thought. Northern Rock had prided itself on the low level of arrears, frequently comparing itself in favourable terms with the rest of the industry. However, investigations have revealed that the bank was using "discretion" in calculating what qualified as an arrear. Standard industry policy is to declare a mortgage "in arrears" if a borrower is behind on three payments. Northern Rock was reclassifying such loans as "performing" once a borrower started making the back payments, even if they were not fully cleared.

Posted by little professor @ 07:27 PM (1055 views)
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15 thoughts on “Your tax money at risk

  • So as originally pointed out by many on this Site : BoE have purchased a load of Junk bonds although ‘AAA’ rated at the time.

    The explanation : However, Mr Sandler’s investigations have revealed that the bank was using “discretion” in calculating what qualified as an arrear.
    Mr Sandler said: “Controls over its policy to permit discretion… have been inadequate. Under revised procedures, any such discretion has now been removed.”

    Don’t you just love the language ? Very subtle !

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  • Quelle Surprise!

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  • uncle chris says:

    I think the fact that no financial institutions would touch the NR mortgage book with a 10ft bargepole told us all we needed to know about the “Good Quality” claims of the NR Directors and Government ministers. However, I can’t figure out whether ministers were/are deliberately setting out to deceive or are just plain incompetent.

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  • So is someone in grovernment going to take full responsiblity for deceiving the house on this? – they said at the time that the mortgage book was of the highest quality!

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  • uncle chris @, but it would be reasonable 3

    I think we have yet another example of deceit here. Once again it is so obvious but impossible to prove. The whole financial world knew the ‘quality’ of the book. It surely would not be reasonable to assume incompetence at this level,but it would be reasonable to assume deliberate intention. This is where the Law should be active.

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  • The official plan is (1) to reduce the mortgage loan book to approx £50bn – this means offloading the better quality customers ie ones with low LTV’s and clean credit history (2) repay BOE loan (3) returm Rock to private sector

    I’d like an explanation now of how they will be able to implement (3) above bearing in mind that the remaining mortgage book will consist largely of high LTV loans and borrowers with rising defaults.

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  • Budget deficit…Cough cough… very PRUDENT!

    I bet Lloyds explained why they wouldn’t touch it, they had a good look for a couple of months…..And I bet thier comments were not passed on to the house. I bet a FOI request for comments for the Lloyds reasons for walking away from said deal , would be deemed as commercially sensative.

    Funny that, mug em and gag em on mass (The tax payer that is).

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  • dohousescrashinthewoods says:

    Forgive me if, like my excellent fellow bloggers, I am underwhelmed to hear that crooks ran a crooked business, that the government swallowed it and that you and I will nurse the debt without reaping the benefits.

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  • too effing right, TC. We get a march through whitehall to protect the country folks rights to kill foxes and fluffy bunnies, but when we are all being ripped off by everyone and anyone, especially the very people we put in power (excluding GB of course) to look after our own and our childrens best interests, sod-all happens. Jeeez, we have all become total mind-washed, impotent sheep. Makes me proud to be British. Where are the anarchists when you need them.

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  • “Standard industry policy is to declare a mortgage “in arrears” if a borrower is behind on three payments.”
    “Controls over its policy to permit discretion… have been inadequate. Under revised procedures, any such discretion has now been removed.”
    All the other banks didn’t do this then.
    Believable?

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  • should probably qualify my statement – GB is an unelected ego maniac, with a massive inferiority complex and sod all personality, not to mention the financial brain of Elmer Fudd.

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  • justwatching says:

    How dare you insult Elmer Fudd

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  • Mr Applegarth appears to be getting off rather lightly in all of this – Shares cashed before the collapse, nice fat pay off and a big fat pension accruing quietly in the background

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  • It’s getting more and more like “Yes Minister” every day. Brown and Darling, instead of showing some spine and making a statesman’s decision – no matter how difficult, just seem to try and bluff and bluster their way through and hope no-one notices that they’re f*cking up at every turn. Well, sadly for them it is now blindingly obvious to almost everyone what they’re up to.

    Roll on Crewe and let’s see the pressure ramped up even more. I’m just sad that Bliar managed to get out scott free.

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  • Im_outta_here says:

    What a shocker…..

    The government knew all this all along. They HAD to bail out Northern Rock! The repercussions of not doing would have been even more damaging.
    Global news of a run on a British bank which would then have gone on to bankruptcy would have totally ruined the confidence in the Pound. Considering the reputation of the Pound is all the UK has to offer anymore since we have no manufacturing, agriculture etc – they had to act, immoral and unfair as it is.
    Once we loose confidence in the Pound, we are finished – if we are not finished already!

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