Bradford & Bingley - Buy to Let Specialists
Discussion
Being on holiday at the moment, I allowed myself the luxury of watching the BBC Parliament Channel for an hour or two where currently, the Banking sub committee are questioning the ex and current CEO's of Bradford & Bingley.
As property speculation/buy to let seems to be a perennial topic of interest on these forums I thought it might be interesting to summarise the highlights for you.
At its 2007 peak, B&B controlled 20% of the entire BTL market. It's mortgage book currently stands at £40 billion, split as 60% BTL, 20% Self Cert and 20% residential.
The 2006 deal with GMAC was to take a minimum of £350million of mortgages PER QUARTER until 2009 - which is being honoured even now with taxpayer money. The purchases from GMAC are majority BTL with the balance made up of self cert. So no standard residential component. And all purchases from GMAC relate solely to the UK market, ie there are no US Subprimes in the tranches purchased
B&B's current default rate is above the CML average - estimated at over 3% as of Q3 2008.
B&B acknowledge that there is concern over fraud in both the BTL and Self cert markets and they are currently actively examining the book in this regard. When questioned further, the focus seemed very much to be on false valuation in relation to BTL, self cert being seen as a secondary concern even though possibly more open to easy fraud.
When asked how B&B would balance their responsibilities to both their customers in terms of fairness of treatment during the arrears/repossession process and their duty to recover assets to reduce their debt to the taxpayer it was made absolutely clear that the repayment of funds to the treasury would take clear priority.
They are developing a programme that will initiate contact with a customer on first missed payment - not the 3 month period that seems to have been the industry norm until last year - and this programme will extend over a 7 month period until repo is enacted. They are also considering waiving early repayment fees to enable people to sell without that extra penalty element.
As a final point of interest, Mr Pym, the current CEO noted that the biggest area of concern was in the larger portfolios of BTL and that the quality of these had deteriorated considerably since Q3 2008. A combination of falling asset values and late/non payment being the issues.
Renumeration and bonuses were covered in the usual ritual tutting and head shaking way and defended staunchly by those enjoying them as being well earned.
B&B were the epitome of the housing bubble - they went full tilt for the riskiest segment of the market without it ever occurring to them that property might not keep increasing in price and now they are faced with a book that is slowly but surely deteriorating in front of them and all they could say was "but how were we to know?"
If the previous CEO is an example of the "quality" of people running the banking and mortgage industry, then we are truly shafted, because I've found more intelligent life forms than him in my pond.
An interesting afternoon.
As property speculation/buy to let seems to be a perennial topic of interest on these forums I thought it might be interesting to summarise the highlights for you.
At its 2007 peak, B&B controlled 20% of the entire BTL market. It's mortgage book currently stands at £40 billion, split as 60% BTL, 20% Self Cert and 20% residential.
The 2006 deal with GMAC was to take a minimum of £350million of mortgages PER QUARTER until 2009 - which is being honoured even now with taxpayer money. The purchases from GMAC are majority BTL with the balance made up of self cert. So no standard residential component. And all purchases from GMAC relate solely to the UK market, ie there are no US Subprimes in the tranches purchased
B&B's current default rate is above the CML average - estimated at over 3% as of Q3 2008.
B&B acknowledge that there is concern over fraud in both the BTL and Self cert markets and they are currently actively examining the book in this regard. When questioned further, the focus seemed very much to be on false valuation in relation to BTL, self cert being seen as a secondary concern even though possibly more open to easy fraud.
When asked how B&B would balance their responsibilities to both their customers in terms of fairness of treatment during the arrears/repossession process and their duty to recover assets to reduce their debt to the taxpayer it was made absolutely clear that the repayment of funds to the treasury would take clear priority.
They are developing a programme that will initiate contact with a customer on first missed payment - not the 3 month period that seems to have been the industry norm until last year - and this programme will extend over a 7 month period until repo is enacted. They are also considering waiving early repayment fees to enable people to sell without that extra penalty element.
As a final point of interest, Mr Pym, the current CEO noted that the biggest area of concern was in the larger portfolios of BTL and that the quality of these had deteriorated considerably since Q3 2008. A combination of falling asset values and late/non payment being the issues.
Renumeration and bonuses were covered in the usual ritual tutting and head shaking way and defended staunchly by those enjoying them as being well earned.
B&B were the epitome of the housing bubble - they went full tilt for the riskiest segment of the market without it ever occurring to them that property might not keep increasing in price and now they are faced with a book that is slowly but surely deteriorating in front of them and all they could say was "but how were we to know?"
If the previous CEO is an example of the "quality" of people running the banking and mortgage industry, then we are truly shafted, because I've found more intelligent life forms than him in my pond.
An interesting afternoon.
Durruti said:
As a final point of interest, Mr Pym, the current CEO noted that the biggest area of concern was in the larger portfolios of BTL and that the quality of these had deteriorated considerably since Q3 2008. A combination of falling asset values and late/non payment being the issues.
I don't think there is anything to worry about as they are in it for the long term.NoelWatson said:
Durruti said:
As a final point of interest, Mr Pym, the current CEO noted that the biggest area of concern was in the larger portfolios of BTL and that the quality of these had deteriorated considerably since Q3 2008. A combination of falling asset values and late/non payment being the issues.
I don't think there is anything to worry about as they are in it for the long term.It is an interesting facet of this though, you would've expected the single BTL to be the more expendable of assets than if your whole well being revolved around a block of flats in Leeds for example, but it doesn't seem to be the case. And this determination to go through the mortgage book looking for potential fraud as an avenue of quickly recovering value will have some interesting consequences over the coming months.
Durruti said:
B&B's current default rate is above the CML average - estimated at over 3% as of Q3 2008.
selmahoos said:
Is that the same as saying their "up-to-date" rate is +/-97% ???
To Q3 2008 yes. It may have changed since then perhaps?Edited by Durruti on Wednesday 18th February 15:30
NoelWatson said:
Durruti said:
As a final point of interest, Mr Pym, the current CEO noted that the biggest area of concern was in the larger portfolios of BTL and that the quality of these had deteriorated considerably since Q3 2008. A combination of falling asset values and late/non payment being the issues.
I don't think there is anything to worry about as they are in it for the long term.
Durruti said:
Durruti said:
B&B's current default rate is above the CML average - estimated at over 3% as of Q3 2008.
selmahoos said:
Is that the same as saying their "up-to-date" rate is +/-97% ???
To Q3 2008 yes. It may have changed since then perhaps?Edited by Durruti on Wednesday 18th February 15:30
selmahoos said:
Durruti said:
Durruti said:
B&B's current default rate is above the CML average - estimated at over 3% as of Q3 2008.
selmahoos said:
Is that the same as saying their "up-to-date" rate is +/-97% ???
To Q3 2008 yes. It may have changed since then perhaps?Edited by Durruti on Wednesday 18th February 15:30
Whilst I admire your optimism, please bear in mind that this figure is almost six months out of date, and given that we do not appear to have had six months of continued economic growth and matching house price inflation it is only reasonable to assume that the numbers would have deteriorated with the rest of the real world economy.
Is that such an unreasonable conclusion to draw?
NoelWatson said:
Durruti said:
As a final point of interest, Mr Pym, the current CEO noted that the biggest area of concern was in the larger portfolios of BTL and that the quality of these had deteriorated considerably since Q3 2008. A combination of falling asset values and late/non payment being the issues.
I don't think there is anything to worry about as they are in it for the long term.
The problem with larger portfolios on B&B's book is that the lovely people at B&B used to offer a facility where if you had all your btl business with them they would smooth the incoming from the portfolio across the debt on the portfolio..... this is now biting them in the arse.
scotal said:
NoelWatson said:
Durruti said:
As a final point of interest, Mr Pym, the current CEO noted that the biggest area of concern was in the larger portfolios of BTL and that the quality of these had deteriorated considerably since Q3 2008. A combination of falling asset values and late/non payment being the issues.
I don't think there is anything to worry about as they are in it for the long term.The problem with larger portfolios on B&B's book is that the lovely people at B&B used to offer a facility where if you had all your btl business with them they would smooth the incoming from the portfolio across the debt on the portfolio..... this is now biting them in the arse.
http://www.dailymail.co.uk/property/article-113408...
and doesn't have to rely on her two other inflated assets
Durruti said:
selmahoos said:
Durruti said:
Durruti said:
B&B's current default rate is above the CML average - estimated at over 3% as of Q3 2008.
selmahoos said:
Is that the same as saying their "up-to-date" rate is +/-97% ???
To Q3 2008 yes. It may have changed since then perhaps?Edited by Durruti on Wednesday 18th February 15:30
But isn't the CML average based for the most part on firms with a far lower (than 60%) percentage of BTL on their books?
Whilst I admire your optimism, please bear in mind that this figure is almost six months out of date, and given that we do not appear to have had six months of continued economic growth and matching house price inflation it is only reasonable to assume that the numbers would have deteriorated with the rest of the real world economy.
Is that such an unreasonable conclusion to draw?
selmahoos said:
Durruti said:
selmahoos said:
Durruti said:
Durruti said:
B&B's current default rate is above the CML average - estimated at over 3% as of Q3 2008.
selmahoos said:
Is that the same as saying their "up-to-date" rate is +/-97% ???
To Q3 2008 yes. It may have changed since then perhaps?Edited by Durruti on Wednesday 18th February 15:30
But isn't the CML average based for the most part on firms with a far lower (than 60%) percentage of BTL on their books?
Whilst I admire your optimism, please bear in mind that this figure is almost six months out of date, and given that we do not appear to have had six months of continued economic growth and matching house price inflation it is only reasonable to assume that the numbers would have deteriorated with the rest of the real world economy.
Is that such an unreasonable conclusion to draw?
{Del-boy-on} This time next year Rodders.....{Del-boy-off}
selmahoos said:
Durruti said:
selmahoos said:
Durruti said:
Durruti said:
B&B's current default rate is above the CML average - estimated at over 3% as of Q3 2008.
selmahoos said:
Is that the same as saying their "up-to-date" rate is +/-97% ???
To Q3 2008 yes. It may have changed since then perhaps?Edited by Durruti on Wednesday 18th February 15:30
But isn't the CML average based for the most part on firms with a far lower (than 60%) percentage of BTL on their books?
Whilst I admire your optimism, please bear in mind that this figure is almost six months out of date, and given that we do not appear to have had six months of continued economic growth and matching house price inflation it is only reasonable to assume that the numbers would have deteriorated with the rest of the real world economy.
Is that such an unreasonable conclusion to draw?
% of total
0 - 1 month arrears <= 75% LTV 31.03%
1 - 2 month arrears <= 75% LTV 0.46%
2 - 3 month arrears <= 75% LTV 0.14%
> 3 month arrears <= 75% LTV 0.09%
0 - 1 month arrears > 75% LTV 63.41%
1 - 2 month arrears > 75% LTV 2.32%
2 - 3 month arrears > 75% LTV 0.96%
> 3 month arrears > 75% LTV 1.58%
NoelWatson said:
selmahoos said:
Durruti said:
selmahoos said:
Durruti said:
Durruti said:
B&B's current default rate is above the CML average - estimated at over 3% as of Q3 2008.
selmahoos said:
Is that the same as saying their "up-to-date" rate is +/-97% ???
To Q3 2008 yes. It may have changed since then perhaps?Edited by Durruti on Wednesday 18th February 15:30
But isn't the CML average based for the most part on firms with a far lower (than 60%) percentage of BTL on their books?
Whilst I admire your optimism, please bear in mind that this figure is almost six months out of date, and given that we do not appear to have had six months of continued economic growth and matching house price inflation it is only reasonable to assume that the numbers would have deteriorated with the rest of the real world economy.
Is that such an unreasonable conclusion to draw?
% of total
0 - 1 month arrears <= 75% LTV 31.03%
1 - 2 month arrears <= 75% LTV 0.46%
2 - 3 month arrears <= 75% LTV 0.14%
> 3 month arrears <= 75% LTV 0.09%
0 - 1 month arrears > 75% LTV 63.41%
1 - 2 month arrears > 75% LTV 2.32%
2 - 3 month arrears > 75% LTV 0.96%
> 3 month arrears > 75% LTV 1.58%
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