Here's a list of Building Societies lending to sub prime borrowers!!

Conrad

Nigel

90% max you say. When some is repossessed they have a habit of wrecking and stripping the joint such that the meagre 10% dissapears. Add to that the cost of several court hearings, balifs and accompanying police prescence, lost interst payments (about 18 months is typical), lost early repayment charges and one soon finds the place is worth a great deal less than the auction houses achieve at sale.

noh

Conrad wrote: »

Nigel

90% max you say. When some is repossessed they have a habit of wrecking and stripping the joint such that the meagre 10% dissapears. Add to that the cost of several court hearings, balifs and accompanying police prescence, lost interst payments (about 18 months is typical), lost early repayment charges and one soon finds the place is worth a great deal less than the auction houses achieve at sale.

I don't doubt that. But what percentage of such borrowers actually default and are repossesed? How many do trash the house. How long after starting the mortgage do they typically get into difficulties?
Its not relevant anyway as I have not got the money to lend!

But I ask again is offering sub prime or (in the case of UCB, Nationwides subsidary) "light adverse" mortgages disreputable?

Nigel

baby_boomer

I agree that building society members should be told their society's policy on sub-prime lending (and also commercial lending - remember the Cheshire BS losing £10+ million through a commercial loan fraud and recording its first ever loss?).

Conrad wrote: »

I dont have exact figures admitedly but this isn't the point.

I agree with your general thrust, but the exact figures are everything. A small loss is not going to put savers' funds at risk.

My own view is that they should stick to the knitting (savings & homeowner mortgages), rather than branch out into areas in which their management is often inexperienced.

noh

The building Societies do inform their members via the annual reports and accounts. Whether the members bother reading them or if they care is another matter.
Conrad said
"The point is these so called reputable pillars of civilisation ought to go out of thier way in revealing the extent of thier activities to thier members. This info should be the first bthing a potential saver hears along with the savings AER"

Why does he think they ought to do this? Is it because he thinks subprime lending is disreputable?
Or does he think that if they offer subprime lending it makes them intrinsically unsafe?

Nigel

baby_boomer

noh wrote: »

The building Societies do inform their members via the annual reports and accounts

Nonsense.

Take the Annual Report & Accounts for the Stroud & Swindon - Pdf link

There is no breakdown of loans by type. Members are merely informed that the society does "some" buy-to-let lending. We learn that there is a "credit risk committee" but I couldn't find the words "sub-prime".

There's nothing to go on for an interested saver who wanted to assess risk.

Or perhaps you would you like to quote something I've missed?

It goes without saying that the summary financial statement which all members received before the AGM is even more cursory.

noh

I haven't read any further than the first on the list Nationwide
http://www.nationwide.co.uk/pdf/about_nationwide/FinalAnnualReport2007.pdf
Which has information on its specialist lending subsidary UCB a Ltd company
Just looked at your link and see Stroud and Swindon offer their subprime via SSMC a subsidary Ltd company, page 6.
But my question is still as above why does Conrad think that the societies ought to go out of their way to highlight their subprime lending activities?

Nigel

baby_boomer

Thanks. I stand corrected.

S&S owns up, in the full accounts, to a group mortgage book which has 10% of subprime / commercial type loans.

noh wrote: »

But my question is still as above why does Conrad think that the societies ought to go out of their way to highlight their subprime lending activities?

Because members may be surprised that building societies have branched out into this non-traditional area and not associated building societies with risk?

Presumably the aim is to make a profit from such business rather than extend homeownership for the masses, but elsewhere in the accounts (after they announce a drop in profits ) we learn that it is not the society's aim to go after profit .

Members own the business and in theory hold the management to account. So the management should explain its business strategy clearly.

49er

I still don't see sub-prime as a problem over here.

Far more important is a business model that can cope with a credit crunch. NR was overly ambitious/aggressive and their stress testing clearly wasn't adequate.

mystic_trev

To be quite frank I'd be more worried about the ones lending shed loads to BTL'ers who haven't a clue what they're doing.

noh

Members if they cared would read the reports and accounts.
Conrad in his original post seemed to imply that if a BS offered subprime loans it is not "safe". Is that what he is saying?
Nigel