I believe all the loans from the BoE are secured by the mortgages Northern Rock has issued on homes. So, not sure the UK taxpayer is in a major financial risky position.
NRK have been loaning money at >100% of LTV for FTB and people who are less attractive to other lenders (not soft sub prime but not far off).
This model is fine so long as
1. very few people fail to pay their monthly repayments,
2. property values keep rising
3. there's a ready supply of cheap debt.
1. the numbers of people failing to meet payments / in arrears and repos are rising
2. values are falling in many areas
3. the credit crung is going to get worse
and suddenly there's a lot of brown smelly stuff about.
Although I'm a lawyer I don't do insolvnecy or land/trust etc law, so do take this with a pinch of salt BUT if NR does go into liquidation the liquidator will have to realise the best value from the available assets , including debts: so if you're a NR borrower and can remortgage you might approach the liquidator and say offer 46p in the £ to clear your mortgage. If this is the best offer going for your debt (their asset) you may just be able to reduce your indebtedness by >50%.
Personally I think the BoE i.e. us taxpayers will take about a £20BN hit on this fiasco. I'd say that unless there's a strong treaury and board backed bid within the next 10 days NR shares will be worth 20p by mid jan.