Bradford & Bingley announced that it will acquire a GBP2 billion ($3.9 billion) share of Kensington Group's prime mortgage portfolio over the next two years. The acquisitions will be made on a monthly basis, and each portfolio will comprise a blend of prime buy-to-let, self-certified and standard loans, in line with strict credit parameters, B&B spokesperson Nickie Aiken said.
"The acquired loans will be on similar credit terms to those originated through Bradford & Bingley's direct and intermediary specialist lending channels," Aiken said, adding that B&B will carry out due diligence to confirm that the loans were appropriate for the group.
Initially, the deal was of little note, until press reports mislabeled the portfolio as "subprime." Corrections have since been made, as subprime refers to the creditworthiness of the borrower and not the type of mortgage product being offered. The borrower is subprime if the credit history is tainted to some extent. But while self-certified mortgages do not readily fit the subprime profile, this segment of the market has, over the past years, come under scrutiny. This is a result of lenders becoming more lax with criteria, sometimes turning a blind eye to borrowers who inflate their earnings to acquire larger mortgages.
But B&B has stated that the self-cert market will continue to be supported by the "growing number of self-employed and increasing job flexibility." Although mortgage demand is beginning to weaken, the company said that the slowdown is modest and that it expected mortgage lending to remain at high levels. Furthermore, B&B added that it is comfortable with the mean consensus forecast that its pretax profits would rise to GBP367.6 million this year.
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