Northern Rock - more problems on the horizon?
Discussion
FT Alphaville link
ftalphaville said:
A non-asset trigger event is a problem. Not just for Granite, but for Northern Rock, by extension the government, and beyond that, the UK mortgage market as a whole.
Northern Rock might be nationalised, its creditors and depositors guaranteed by HM Government. But the underlying securitisation vehicle - some £38bn of housing assets - has to fend for itself.
A non-asset trigger event means that Northern Rock - the company - will no longer receive any payments from Granite - the trust - until all the trust noteholders have been repaid.
In laymans terms....Northern Rock might be nationalised, its creditors and depositors guaranteed by HM Government. But the underlying securitisation vehicle - some £38bn of housing assets - has to fend for itself.
A non-asset trigger event means that Northern Rock - the company - will no longer receive any payments from Granite - the trust - until all the trust noteholders have been repaid.
comment said:
Basically Granite is an arm’s length vehicle set up by Northern Rock to hold mortgages (originated by Northern Rock), funded by mortgage securities held by third parties.
In order to keep Granite in good shape as mortgages started to perform worse, Northern Rock was supposed to beef up it’s contribution to the trust to protect the third party security holders.
It has declined to do so. Thus Granite - a very big part of the mortgage market - is in deep do-do.
copied from comments on Alphaville
In order to keep Granite in good shape as mortgages started to perform worse, Northern Rock was supposed to beef up it’s contribution to the trust to protect the third party security holders.
It has declined to do so. Thus Granite - a very big part of the mortgage market - is in deep do-do.
copied from comments on Alphaville
Edited by jesusbuiltmycar on Thursday 20th November 12:54
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