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Northern Rock launches good/bad bank model

Northern Rock has officially split today between Northern Rock plc and Northern Rock Asset Management.

The nationalised lender has launched a “new savings and mortgage bank” which comprises of retail savings balances of approximately £19bn and approximately £10bn of residential mortgages. It is also offering new savings products and new mortgage lending services.

The bank has also revealed that the Government and the FSA are currently reviewing the possibility of removing the state guarantee on its savings deposits and reverting back to Financial Services Compensation Scheme cover only.

Northern Rock Asset Management has also launched today, which will act as an administrator to Northern Rock’s wholesale assets and debts.

It will hold and service a residential mortgage book of approximately £50bn, of which up to £5bn are in arrears. It also controls a portfolio of personal unsecured loan accounts of around £4.5bn.

The portfolio also includes the bank’s residual interest in those mortgages which have been sold to the Granite securitisation programme and the Northern Rock covered bond programme totalling approximately £38bn. Northern Rock Asset Management will no longer undertake any new mortgage lending.

Chief executive Gary Hoffman says: “I am pleased to announce that we have successfully completed the legal and capital restructure. This helps to build a stronger future and delivers value to taxpayers.

“All savings accounts have been transferred to the new bank and we are writing to our savings customers to confirm that. We are also writing to mortgage customers of the new bank to confirm that their accounts have been transferred as part of the restructure. Our aim was to make this process as smooth as possible for all of our customers.”

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  1. I am an existing N/Rock mortgage customer on a fixed rate product until March 2011, Due to a high LTV I find my account placed with the Asset Management Section of N/Rock following the restructure with the prospect of only being offered a loaded SVR (currently 7.59%) seemingly to deter existing customers from remaining with N/Rock. My initial thoughts are that I will not be able to Re-mortgage to another lender or if so at considerable cost? therefore despite my account being well run and entering into a binding mortgage agreement on both sides I (the customer ) will have one choice and be penalised by a loaded SVR subject to change. I am not responsible for the N/Rock failure therefore if I am financially disadvantaged by the new operating mortgage conditions will I be compensated in the event I am ultimately re-processed due to unaffordability going forward or have my costs covered to Re-mortgage to a new Lender, which is what the N/Rock Asset Management would want me to do. It is grossly unfair that customers who have met their obligations should now be faced with this situation. The government has stepped in to protect the business despite management failings but no support is being offered to customers who are now being penalised and have few options. Again the small man and customer is to be ignored. There’s a scent of Big Brother not the Channel 4 Reality TV Show but 1984 by George Orwell.
    “Long live the corporation/state”

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