Northern Rock exits subprime lending

Troubled mortgage bank Northern Rock said today it has withdrawn from the near-prime and subprime mortgage sectors.

Northern Rock, which was taken into public ownership last month, had originated the riskier mortgages for Southern Pacific Mortgage, a unit of investment bank Lehman Brothers, which then funded and administered the loans.

Northern Rock, which used its distribution channels to attract the business, did not write any near-prime or subprime mortgages to its balance sheet.

Lehman announced in September it would trim its US and UK home loan operations but continues to write subprime and near-prime loans in Britain.

Northern Rock, under troubleshooter Ron Sandler, is expected to shrink its mortgage book while boosting retail savings, aiming to revive funding while capital markets remain uncertain.

European Union rules could also force the bank to pull back from being one of the sector's most aggressive lenders.

© 2008 ireland.com