The society's purchase brings to a close Salomon Brothers' troubled and embarrassing mortgage-lending experience in the UK. In recent years The Mortgage Corporation (TMC) repeatedly came under attack from consumer groups for its high interest rates and allegedly aggressive stance towards its own borrowers.
Chris Heard, chief executive of First National's existing UK mortgage arm, Mortgage Trust, said his company's policy towards TMC's 30,000 borrowers, who owe a total of pounds 1.2bn in home loans, would be noticeably different. "Things at TMC will improve further," he said.
TMC, set up by Salomon in 1986, was one of a new breed of highly competitive centralised lenders which grabbed market-share from building societies by launching innovative products and operating looser lending criteria. Centralised lenders mostly hit the buffers in the late 1980s, through the collapse in the housing market, unemployment, high interest rates andrepossessions. TMC gained notoriety for its unwillingness to reduce its interest rates to borrowers at the same speed as other lenders. Consumer groups and trading standards officials were also inundated by complaints from borrowers complaining of threatened evictions. Last year, the Office of Fair Trading, which regulates the loans market, threatened to strip TMC of its consumer credit licence, but backed away after the firm convinced the regulator it was reforming.
First National, whose acquisition of TMC means its mortgage assets now total almost pounds 4bn, the equivalent of the UK's 11th largest building society, said it was highly pleased with its purchase. The society's managing director, John Smyth, said: "Having established a presence in Britain with the acquisition of Mortgage Trust, we have been keen to expand the society's operations here. "[It] adds scale to our operations and will both reduce our unit costs and provide significant earnings enhancement."
Mr Heard said one of the first steps would be to rationalise activities between his own operation in Surrey, and TMC's, which employs 200 staff in Woking. He said that First National's expanding savings arm in the UK might lead to staff being kept on in jobs.