Mortgages  

B&B mortgage servicing outsourced

B&B mortgage servicing outsourced

Bradford & Bingley has entered into a binding agreement for the transfer of its mortgage servicing operations to Computershare.

A statement from the government’s UK Asset Resolution explained it is a seven year outsourcing contract covering £30bn of assets.

UKAR will continue to own and have ultimate responsibility for Northern Rock and Bradford & Bingley mortgages and loans, with no changes to customers’ terms and conditions.

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Some 1,700 colleagues based in Sunderland and West Yorkshire will transfer to Computershare, while UKAR will retain the remaining 250 employees who will continue to manage the banks’ balance sheets and administer the Help to Buy Mortgage Guarantee Scheme and Help to Buy Isa.

The transaction is subject to certain conditions and is expected to complete sometime this summer.

In the wake of the 2008 financial crisis, HM Treasury set up a limited company called UK Financial Investments to manage the government’s shareholdings in banks subscribing to its recapitalisation fund.

In 2010, it then created UK Asset Resolution to manage the closed mortgage books of failed banks Bradford & Bingley and Northern Rock.

By 2013, UKAR had paid back some £5.2bn of government funding from the nationalisation of the banks.

The number of mortgage customers fell to 587,000 during 2012 (compared to 638,000 in 2011) as credit-worthy customers refinanced their mortgages and moved to other providers.

By March of this year, the government confirmed plans to completely sell off mortgages owned by Bradford & Bingley by 2017 or 2018.

The latest Budget documents stated: “Following the recent successful sale of £13bn of former Northern Rock mortgages, the Treasury, UK Financial Investments and UKAR have been exploring further sales of UKAR mortgages: in particular, a programme of sales designed to raise sufficient proceeds for Bradford & Bingley to repay the £15.65bn debt to the FSCS and, in turn, the corresponding loan from the Treasury.”

Adviser view

Ray Boulger, senior technical manager at John Charcol, explained many smaller lenders find it more economical to outsource their mortgage servicing, because internally they do not benefit from the economies of scale a large organisation does.

“If the decision to outsource mortgage servicing of its Bradford & Bingley book was made on a purely commercial basis it would suggest that UKAR has concluded that as the size of the book declines it is now down to a size, or will be soon, where it is more cost effective to outsource the servicing.

“From the staff’s situation, assuming the terms of the transfer to Computershare are fair, an advantage is that being part of a company with a long term interest in maintaining its presence in the market is that it will provide more job security than being employed by a business whose long term plan is to wind it down.”

In addition to commercial imperatives, Mr Boulger pointed out the politicians who ultimately control UKAR may see some benefit in de-nationalising as much the operation as quickly as is commercially sensible.