Granite is a group of companies which have been set up solely for the purposes of providing an on going source of funding to Northern Rock. The "Granite" companies can be collectively termed as a "securitisation vehicle".
Granite is similar to other securitisation vehicles. Northern Rock sells mortgages to Granite. The Granite vehicle funds the purchases of these mortgages by issuing bonds to investors. The cash that is raised from investors is then used by Granite to purchase the mortgages from Northern Rock.
Northern Rock, however, retains an interest in the mortgages it sells to Granite. The proceeds from the sale of mortgages to Granite will always be at their actual value, but the payment to Northern Rock will be made partly in cash and partly as a share of future receipts from the mortgages (the so-called "seller's share").
The principal reason the seller's share was established was to protect the Granite bondholders if Northern Rock became insolvent. In such circumstances, customers whose mortgages had been sold to Granite might be entitled to set off amounts owed to them (for example, in deposit accounts) against amounts they owed under their mortgages. The seller's share bears this set off risk.