'Ruthless' Northern Rock accused

Aug 28 2008 by William Green, The Journal

NORTHERN Rock was yesterday accused of ruthless repossessions amid claims it is taking a London home- owner to court in Tyneside.

The Liberal Democrats said a woman in Richmond, south west London, was facing court action in North Shields by Northern Rock to “weaken her defences”.

The claims came as new research indicated that Northern Rock was responsible for one in 13 repossessions in the UK in the second quarter of this year with its customers getting into trouble much faster than other borrowers.

A company spokeswoman stressed that repossessions were a last resort.

But a monthly average of 353 of its best borrowers faced repossession in the second quarter, up from 134 in the previous three months, according to ratings agency Standards & Poor’s.

The agency, which monitors the financial health of firms, also recorded a jump in Northern Rock borrowers falling more than 90 days behind on their repayments.

The affected mortgages support the bank’s controversial £40bn Granite offshore trust to which Northern Rock sold off its most profitable property loans.

The news has also raised fresh concerns about the quality of the bank’s loan book and whether the taxpayer bill for dealing with the bank would increase further. Speaking to The Journal, Lib Dem Treasury spokesman Vince Cable accused Northern Rock of being very aggressive in dealing with repossessions after issuing mortgages worth more than the value of properties.

He said: “Northern Rock have been particularly ruthless in repossessions because they have got a lot of 125% Together mortgages which were completely mad at the time and even madder now.”

Dave Anderson, Labour MP for Blaydon, said: “Certainly the advice that the Government would give is that repossession should only be done as a very last resort and everything should be done to avoid it.

“And as Northern Rock is now owned by the Government, it should apply it even more strongly.”

A Northern Rock spokeswoman said it could not go into detail of the individual homeowner cases, but stressed repossession was a last resort.

She said it was in the interests of the bank and customers for them to keep paying the mortgage and stay in their homes, with debt management staff on hand to provide help.

But she added that repossession might be a better option if a reasonable agreement could not be reached and arrears were mounting up.