UK Mortgage Lender Hiring Debt Collectors Amid Massive Layoffs

Failed United Kingdom-based bank and mortgage lender Northern Rock will be beefing up its internal debt collection department from the current 170 people to 440, according to the company’s executive chairman.

In an interview with the London-based Financial Times, chairman Ron Sandler said that the bank wanted to hire people with debt collection expertise to help it identify and pursue borrowers in arrears. "There are organizations out there which have more expertise in this area than we have,” he told the Times.

Northern Rock, a bank that reported revenues of nearly $10 billion in 2006, was nationalized by the U.K. government in February after it was forced to seek a $47 billion emergency loan from the country’s reserve bank, The Bank of England. The government took over after attempts to sell the bank were unsuccessful. Sandler was appointed by the government as chairman.

Northern Rock suffered from the subprime mortgage meltdown in the U.S. and U.K., as it was highly exposed to the risk loans. Part of its reorganization plan is the laying off of some 2,000 of its 6,700 workers.

But the $47 billion loan from the Bank of England is due in 2010, according to Sandler. He said that the debt recovery specialists will be brought in to keep late payments under control so the bank can pay down its loan.

The 90 days or more delinquency rate for Northern Rock mortgage loans now stands at 0.95 percent compared to the 0.57 percent rate at the end of 2007. There are concerns among the bank’s management that the mortgage portfolio is deteriorating further.