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February 13, 2008    

UK sub-prime lenders bring 50% of repossession cases

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by Gill Montia

Investigative journalists working on the BBC’s Radio Five Wake up to Money programme have reported that sub-prime lenders are responsible for bringing over 50% of UK repossession orders.

This group of lenders, which caters for borrowers with poor credit histories, accounts for around 6% of the total mortgage market.

The research looked at 1,200 cases brought before 18 county courts in January 2008.

Over 10% of the cases involved Southern Pacific Mortgage (SPM) and Preferred Mortgages, two sub-prime lenders owned by Lehman Brothers, the US investment bank.

GE Money and GMAC-RFC, two of the leading sub-prime lenders in the UK, were each listed in more than 100 cases.

Not all the cases examined ended in repossession because borrowers frequently reach a settlement with their lender, or sell their homes.

According to a spokesperson for SPM and Preferred: “Of proceedings started, where solicitors become involved, five out of six are resolved without having recourse to repossession.”

In 2007, repossessions rose to an eight-year high of 27,000 and property experts are warning that the figure could rise again this year.

Sub-prime lenders maintain that their customers are more likely than mainstream borrowers to fall into arrears, because they already have poor credit histories.

Turning to mainstream lenders, Britannia, Bradford & Bingley and Northern Rock were most frequently named in court actions, relative to their market share.

In Britannia’s case, the figure includes actions taken by its subsidiary, Platform Funding, which specifically arranges sub-prime mortgages.

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