Bradford & Bingley last night struck a deal to avoid taking an additional £1bn in mortgages on to its balance sheet after the beleaguered lender renegotiated an agreement with GMAC-RFC, the UK arm of the US financial group.
The agreement eases the pressure on B&B, which is already under pressure from rising arrears on its existing mortgage book and yesterday had its credit ratings cut by two of the largest ratings agencies.
Under the original deal with GMAC, B&B was committed to absorbing mortgages worth a further £1.75bn on to its balance sheet by the end of 2009. Instead, B&B will now take mortgages worth £500m by the end of the year, and a further £225m-£250m in the first quarter of 2009.
The agreement effectively draws a line under a deal that has contributed greatly to B&B’s current woes. Arrears on the GMAC mortgages have turned out to be significantly higher than on B&B’s own book, adding to concerns about the bank’s capital position. As a result of the turmoil in the credit markets, B&B has been forced to keep the mortgages on its books rather than offloading them in the form of securitisations.
Financial Times, Daily Telegraph