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Pepper wins Mobius servicing contract

25 July 2008 4:39PM
Non-conforming lender Pepper Home Loans has moved into the third party servicing business, winning a contract from Allco Finance Group to take over the specialist servicing of its mortgage business Mobius. Pepper, which won the contract in a tender process in June, will work with Perpetual, which will act as prime servicer.Pepper chief executive Patrick Tuttle said Perpetual would look after borrowers' direct debits and "run the tapes", while Pepper's role as special servicer would cover arrears management, collections, repossessions, lodgement of mortgage insurance claims and management of legal work.Tuttle said there was scope for Pepper's third party servicing operation to grow. A number of specialist lenders have stopped originating in the past six months and at the moment most of them are continuing to generate revenue by servicing their books. Tuttle said: "For many of them that is no more than a medium-term strategy to buy time until they can start originating again. It is not core business and for some of them it will not be sustainable."In some cases the funders and investors will be pressuring these originators to outsource their servicing because they want to make sure the assets remain in good shape."Pepper is not the only group hoping to pick up servicing contracts. Bluestone Group has been in the market and Tuttle said Allco chose from a short-list of four or five.The Mobius book is made up of $900 million of mortgages and $100 million of leases. Tuttle said the servicing contract produced "attractive revenue".One downside to the Mobius contract is that one group of customers - newsagents who leased payment terminals through Bill Express and Technology Business International - are on a payment strike. The leases were financed through AssetSecure and in turn through a Mobius trust.Moody's Investors Service earlier this week downgraded the credit rating of the senior and subordinated notes of the Mobius ELR-01 Trust. Moody's said in a note that while it considered the contractual arrangements to repay the equipment leases were legally robust, there was a significant risk of non-payment or delay in payment that may result in both payment shortfalls and permanent losses.

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