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The credit crunch appeared to have claimed another scalp when it emerged this week that Scarborough Building Society is being rescued by its bigger Yorkshire cousin, the Skipton. In a joint statement, they said this was an opportunity for the two societies to create an enlarged institution that was better placed to deal with future uncertainties in the financial marketplace.
The Scarborough admitted the difficult trading conditions had dealt a blow to its finances. When you see what the society has been dabbling in, you may wonder whether this was a full-scale bail-out.
In October 2006, the Scarborough launched a specialist lending arm offering "adverse buy-to-let", "heavy adverse", self-certification and other "non-conforming" mortgages. Later it boasted that the popularity of this division "far outstripped anything we dared hope for".
Then in July last year, the Scarborough's North Yorkshire Mortgages arm bought a £300m portfolio of "prime, buy-to-let and self-certification [mortgage] assets" from GMAC-RFC, which specialised in sourcing home loans and selling them on to other lenders. It is not clear what has happened to this portfolio since then, or how well - or badly - these loans are faring, but other lenders that bought mortgages from GMAC include Bradford & Bingley and Britannia. B&B has said arrears on the GMAC loans, many of which were self-certified by customers, were higher than on its own mortgages, and Britannia also has higher-than-average arrears on its acquisitions.
Founded in 1846, the Scarborough has more than 200,000 members, none of whom will receive a windfall.
John Carrier, the Scarborough's chief executive, says of the specialist lending arm: "We stopped any form of lending in that subsidiary in the very early part of this year." In a statement, it adds: "Our arrears levels for the group as a whole are below the industry average and have played no part in our proactive and positive decision to merge with Skipton."
r.jones@guardian.co.uk
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