NHL returns to profit and lending

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NATIONAL Home Loans, the mortgage lender, has reported its first profit in four years and will return to lending after three years' absence from the mortgage market.

The company made pounds 4.1m before tax in the six months to the end of March, against losses last year of pounds 26.1m. A long-term facility to finance new loans has been arranged with Abbey National.

NHL's loan book fell from 52,000 this time last year to close to 40,000 now. Jonathan Perry, chairman, said the company had to return to lending or the business would run down to the point at which it would be unviable.

Loan repayments of loans by NHL's customers resulted in a pounds 550m decline in the value of mortgage loans. Interest income fell from pounds 35.8m to pounds 32.1m.

NHL will need to refinance its balance sheet before paying a dividend. A total of pounds 20.3m of prefernce share dividends is now in arrears and the company has negative distributable reserves of pounds 149m. Mr Perry said he hoped the refinancing would occur before the end of 1994.

NHL came close to financial disaster as a result of recession in the housing market. The company suffered in the early 1990s as borrowers fell into arrears. At the end of 1991, NHL collected only 61 per cent of monthly payments due. In early 1993, the company had a stock of more than 1,800 repossessed houses.

The arrears problem, however, has eased considerably. The number of loans of more than three months in arrears, excluding repossessions, has dropped from 3,139 to 1,516. NHL said it was receiving 109 per cent of the monthly cash due from the arrears book. The stock of repossessions had fallen to 539 at the end of March.

Mr Perry said new lending would be based on more stringent lending criteria.