REAL ESTATES FORUM

Northern Rock is ready to repossess thousands of homes as bank chiefs
outrageous payouts are unveiled

Evening Standard
Last updated at 12:22pm on 01.04.08

Thousands of families face being evicted from their homes this year by
Northern Rock, the Government-owned bank admitted yesterday.

Repossessions by the beleaguered lender have soared. And they could climb
even higher as the year goes on, it warned.

Panic: Customers queue to withdraw their money from Northern Rock in Croydon
last year

Ministers are left facing the political nightmare of being held ultimately
responsible for turfing thousands from their homes.

The revelation came as experts said the former chief executive, whose
cavalier business strategy nearly destroyed the bank last year, can expect a
pension worth nearly Ł475,000 a year from the age of 60.

Adam Applegarths reward for failure is on top of the Ł760,000
termination payment he currently enjoys.

This money, equal to his basic salary, is being paid on a monthly basis for
a year or until he gets another job - which seems unlikely given his epic
failure.

Meanwhile about a third of Northern Rocks workforce - roughly 2,000
employees - will lose their jobs by 2011, according to the new management
team.

However, the recently nationalised banks annual report yesterday shows how
the financial problems faced by many of its staff and borrowers are not
shared by Mr Applegarth.

It reveals that his annual pension built up during his 24 years at the bank
from which he parted company in December is currently worth Ł304,643.

As he is only 45 it will grow to around Ł475,000 by the time he is 60,
according to financial advisers Hargreaves Lansdown who assumed modest
annual growth of 3 per cent.

Mr Applegarth also got more than Ł5,000 to spend on enhanced security at
his Ł2.5million home near Newcastle upon Tyne and Ł5,000 plus VAT towards
his legal bill.

Vince Cable, the Liberal Democrat Treasury spokesman, said the payoff was
outrageous.

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He added: The chief executive who led the disastrous business strategy is
being generously rewarded for failures of leadership whereas shareholders
get nothing, large numbers of workers are being made redundant and the
families who accepted his toxic mortgages are now faced with homelessness.

Its an outrageous way to treat people and it gives the wrong signals to
British business.

Other Northern Rock winners include Paul Thompson, 45, who was hired as a
non-executive director on January 17 this year and retired five weeks later
with a Ł100,000 paycheque.

Ron Sandler, 56, the new executive chairman, is earning Ł90,000 a month and
Ann Godbehere, 52, chief financial officer, is getting Ł75,000.

Over the last year, the number of Northern Rock borrowers losing their homes
after falling behind with their mortgages shot up by 234 per cent.

More than six homes were repossessed by the bank every day last year,
compared to fewer than two in 2006.

Numbers are expected to keep on climbing this year as soaring mortgage costs
cripple over-indebted customers of the bank which collapsed last year after
its money markets dried up and customers reacted by queuing to withdraw
their savings.

On repossessions, the biggest worry surrounds those who took out Northern
Rocks controversial Together mortgage which gave borrowers up to 125 per
cent of the value of their home.

They face a bleak future because every bank and building society in Britain
has axed its supersize mortgages of more than 100 per cent.

When their loan deal ends, they will not get another cheap deal unless they
can put down a big deposit and will be able to stay with Northern Rock only
if they pay the banks expensive standard variable rate.

Many will face repossession because they will not be able to afford the
higher mortgage costs.

Ray Boulger, from the mortgage brokers John Charcol, said: From a political
point of view, it could be very damaging for the Government.