Around 39,000 mortgage holders will have their loans transferred to Citi after HM Treasury ignored calls for the latest tranche of loans to be sold to active lenders.
Last week the Financial Conduct Authority (FCA) opened a consultation into changing affordability assessments to assist mortgage prisoners in remortgaging to a new lender.
However, the regulator does not include trapped borrowers who are in arrears as mortgage prisoners.
Former Financial Conduct Authority regulator Lynda Blackwell, now consultant at Thistle Dhu, was shocked at the government’s decision.
“For the government to consciously put those borrowers into a potentially worse position is astonishing,” she told Mortgage Solutions.
“Why not simply cut out the middleman and let these borrowers switch direct to active lenders, as the regulator wants? This is simply adding to the problem rather than helping resolve it.”
‘Highly competitive auction’
Announcing the deal today, HM Treasury (HMT) and UK Asset Resolution (UKAR) said the sale of the 39,000 NRAM mortgages and 27,000 unsecured loans “was approved following a highly competitive auction”.
Financial completion of the £4.9bn is expected within the next few weeks and will enable UKAR to repay all outstanding government loans to HM Treasury.
It will take the UKAR book down to around £8bn worth of assets, from about £14bn in September 2018 and from £116bn in 2010.
The majority of financing for the transaction is being provided by bond manager PIMCO and the mortgages will continue to be administered by the same servicing company.
“A key element in selecting the successful bidder was the treatment of customers,” HM Treasury said.
“All bidders were required to agree to a non-negotiable package of customer protections before their bid was considered.
“Customers will therefore see no changes to the terms and conditions of their mortgages, with the same protections they currently receive under UKAR’s ownership today.”
Mortgage Solutions has contacted HM Treasury to ask why it did not choose to sell the books to an active lender.
Citi did not comment.
Chancellor Philip Hammond said: “Through our careful oversight of the country’s finances we are continuing to recover significant amounts of money that were loaned during the financial crash.
“Today’s sale enables us to recover the full amount taxpayers loaned to Northern Rock and Bradford & Bingley, helping us pay down our debts and strengthen our finances for the future.”
UKAR chief executive officer Ian Hares added: “This is a significant step in the reduction and simplification of our balance sheet.
“When complete, this sale will reduce UKAR’s balance sheet to £8bn, a 93% reduction since formation.
“Looking forward, we are now focussed on releasing the government from its remaining investment in NRAM and Bradford & Bingley plc.”