Northern Rock shares plunge 31%, Paragon Group drops 17%

The gap between the rates banks pay to borrow money for three months, and that paid by governments, is at a 20-year high, suggesting that someone somewhere is believed to be in financial trouble.

I reckon there is others. Many are hiding it, Bradford & Bingley is a name that has been thrown around today.

Next week is going to be interesting.

[edit on 14-9-2007 by infinite]

If NR does go bust, does anyone know what would happen with their outstanding mortgages?

I have my mortgage with them, and while thoughts of my debt being written off with their demise are entertaining, thoughts of the administrator calling in the debt immediately are not. So what happens?

If you look at the chart at the end of the BBC source article, it looks like this stock is down over 60% or so this calendar year.

You seen this?



news.bbc.co.uk...

Regained some ground and ended up down 17%.

This is worrying now.

[edit on 14-9-2007 by infinite]

Originally posted by Paul
I have my mortgage with them, and while thoughts of my debt being written off with their demise are entertaining, thoughts of the administrator calling in the debt immediately are not. So what happens?

Well, I'm pretty sure your mortgage wouldn't just be written off, no matter how nice that sounds.

I think they'd just repackage these loans and sell them to other banks or as mortgage backed securities to investors. At least that's what would happen in the U.S.



[edit on 9/14/2007 by djohnsto77]

Originally posted by djohnsto77
I think they'd just repackage these loans and sell them to other banks or as mortgage backed securities to investors. At least that's what would happen in the U.S.

Same in the UK.

Terms will not be changed, the administrator will pass it on to another bank. If it got to that point, the government would step in and legislate to protect owners.

Thats pretty much what I thought.

One thing though, which thankfully wouldn't affect me as I've borrowed a sensible amount: A lot of people have borrowed to the limits of very generous lending criteria (I was offered 4x the sum of mine and my mrs' salary by NR), so with a credit cruch and stricter lending criteria, will those loans be fit for repackaging and selling on? Who would want to buy them?

Originally posted by Paul
so with a credit cruch and stricter lending criteria, will those loans be fit for repackaging and selling on? Who would want to buy them?

In the repackaging process, they'll group loans of different quality together. So the high quality loans to people with good credit and equity in the home will be sold at high prices, while the high risk loans will be sold at deep discounts, high interest rates to people/organizations who want to take on the risk.

This is an interesting look

Just so I am clear here. did this company invest in US morgtage securities? Or is this a UK crisis in and of itself?

The reason Im curious is that if its a separate crisis (I mean they are linked on some level) then this really bodes ill for the global economy as a whole.

From what I understand, this has nothing to do with the U.S.

This is a bank that writes British mortgages.

Originally posted by djohnsto77
From what I understand, this has nothing to do with the U.S.

This is a bank that writes British mortgages.

I tried finding a business breakdown for them but that confirms what I had found so far.

Has anybody seen any indications of mortgage issues in other EU countries?

Originally posted by djohnsto77
Well, I'm pretty sure your mortgage wouldn't just be written off, no matter how nice that sounds.

I agree that simply not going to happen. If you look at your loan docs you will see stoff like "GMAC and its successors" etc. In the US you also sign a papaer (among the 100's when you buy a house) that you loan may be sold on the secondary market.

No matter how bad your credit is as long as you are making payments someone will pick up your note. A home mortgage is basicaly like a bond that cities, states, and even the Federal government issues (T-Bills) and can be traded as such.

Again, people with good credit and equity will pay a lower rate to the holders of the note but have less risk. People on the other end of the spectrum who have bad credit usually pay a higher rate as they are a riskier investment. The more risk you assume the higher potiential returns.

Originally posted by djohnsto77
From what I understand, this has nothing to do with the U.S.

This is a bank that writes British mortgages.

No, it's linked to the global credit crunch that has followed after the sub prime mess.

Originally posted by infinite
No, it's linked to the global credit crunch that has followed after the sub prime mess.

Well yes, this is part of a global pattern. But still these mortgages were on properties in the UK, not the U.S., correct?

[edit on 9/14/2007 by djohnsto77]

Originally posted by djohnsto77
Well yes, this is part of a global pattern. But still these mortgages were in the UK, not the U.S., correct?

Well it's a UK mortgage lender,but I don't know how bad US sub prime left it exposed. It could have some, but I really don't know. Sorry.

Is this being covered in the States at all?



news.bbc.co.uk...

Has anyone from the United States government commented on a possible international review on bank regulations?

Originally posted by infinite
Is this being covered in the States at all?

I've been watching FOX all day and haven't heard a peep about it. The U.S. markets will close in about 50 minutes so Neil Cavuto will be coming on soon. I'll let you know if he mentions it.

Originally posted by djohnsto77
I've been watching FOX all day and haven't heard a peep about it. The U.S. markets will close in about 50 minutes so Neil Cavuto will be coming on soon. I'll let you know if he mentions it.

CNBC had a little sniff when the US markets opened, but thats it.
I'm quite surprised by the lack of coverage.

explanation of what will happen if Northern Rock goes bust;

What will happen?

Are savings at risk?

Anyone with money in a savings account with the Northern Rock - or indeed any other bank - needs to realise that some of their money is always at risk, if they are saving more than £2,000.

Banks are covered by the Financial Services Compensation Scheme.

If you have up to £35,000 on deposit then you would, in the event of insolvency, get back all of the first £2,000 in your account and 90% of the next £33,000.

That would be a total of £31,700 per person in compensation, or to look at it another way, a loss of £3,300.

But any money above the £35,000 threshold might be lost altogether.