Pepper Homeloans may be sold to Aladdin Capital, a US-based private equity investor that specialises in credit-related businesses.Pepper, a funder of non-conforming home loans established in 2001, survived the credit shock of the last three years by ramping up its mortgage servicing business. It continues to undertake a small amount of new lending with the support of its warehouse funders (Barclays, CBA and NAB).The current owners of Pepper are KTP Global Finance and Merrill Lynch. Aladdin appears to be the bidder preferred by Pepper's management, who will emerge with a stake in the firm once the sale is finalised in a few weeks. Other shortlisted bidders for Pepper included Pengana Capital (a structured finance boutique based in Singapore) and another US group associated with Goldman Sachs.Pepper is likely to be sold for a little more than $20 million, though there is talk that Aladdin, while the preferred bidder, was not the highest bidder.Pre-tax profit for Pepper in the year to December 2009 was $18.7 million, and net profit $14.3 million, though some one-off items inflated this profit.Pepper's loans under management are thought to be around $500 million and loans under administration around $1.5 billion.Patrick Tuttle, managing director of Pepper, did not want to be drawn on the state of the sale process yesterday. He did say that Pepper was becoming more optimistic about finding investors in non-conforming loans and pointed to the pricing for the low-doc (but prime) home loan pool sold by Resimac yesterday as evidence of improving investor demand.Tuttle said Pepper planned to step up its marketing to mortgage originators, including at the Mortgage Finance Association of Australia national convention in Melbourne next week.