Saturday, August 15, 2009

U.K. More Losses for Nationalized Buy-to-Let Lender

by Calculated Risk on 8/15/2009 08:42:00 AM

From The Times: Rising wave of fraud plunges Bradford & Bingley deeper into the red

Bradford & Bingley, the nationalised mortgage lender, has laid bare the dire state of its loan book and said that a rising wave of fraud dragged it to a £160 million loss for the first half of the year.

... the Council of Mortgage Lenders ... has forecast that 65,000 people will lose their homes this year, up from 40,000 last year and just under 26,000 in 2007.

B&B, which was the UK’s largest lender to landlords before it was broken up and its mortgage book nationalised last September, said yesterday that 40 per cent of its mortgage book was in negative equity, up from 30 per cent at the end of 2008. ...

B&B has 60 per cent of its book in buy-to-let and 20 per cent in self-certified loans, sometimes called “liars’ loans” because borrowers did not have to provide proof of salary.
Customers falling more than three months behind on repayments rose to 5.88 per cent of the book, from 4.6 per cent at the year-end. ...

The number of homeowners falling behind with mortgage repayments continued to climb in the second quarter. About 270,400 borrowers had missed three or more monthly payments between April and June, up from 264,700 in the first three months of the year. ...

The number of possession orders issued by the courts edged down in the second quarter [as] the “pre-action protocol” introduced late last year ... were dampening applications from lenders.
"Buy-to-let" is lending to investors for the purpose of renting the property. Some of these investors were really speculators buying for appreciation.

In some areas - like London - investors accounted for a majority of new home purchases in recent years (from a 2007 article):
According to London Development Research, two-thirds of all new homes built in the capital are being bought by investors.
Rising delinquency rates, record foreclosures, more borrowers in negative equity ... sounds like the U.S.