Challenger Financial Services Group has clarified the extent of the slow down in its mortgage business in recent months.The group's chief executive, Mike Tilley, told the Financial Review that mortgage volumes were running at a rate of about 25 per cent of the last two years.Challenger wrote $4.8 billion in new mortgages during the December 2007 half year, according to the latest financial statements, broadly consistent with the December 2006 half year. That was well down from more than $7 billion in the first half of the 2007 calendar year. Tilley told the newspaper that "we are better off in terms of the profit impact [on new home loans] than what the banks are."That profit impact may still be severe, since, he said, "we're not making any money out of writing [new loans] at that level," he said, in a reference to the elevated cost of funding.The Sunday before last, in an interview with ABC's Inside Business, Tilley said "we have enough capacity to continue writing mortgages at the rate that we are today for at least another 12 months. And our business continues to be quite profitable."So the profitability of Challenger's mortgage business appears rather fluid.Meanwhile Seiza Capital is the latest specialist lender to scale back its operations as it comes up against funding limits.Seiza chief executive Simon Robinson said the group laid off a number of staff last week.Industry sources said there were 15 redundancies, about half the company's staff.Robinson said that number was exaggerated. "We are in the same boat as everyone else in this industry. We are pushing against our limits and we have to slow origination."We are still doing originations and we are servicing our book. We will tread water until the funding situation improves."Robinson said there was no threat to the group's warehouse arrangements. Seiza was launched in 2004. It priced its first public securitisation, Seiza Augustus 2007-1 Trust, a $400 million issue of mortgage backed securities, in March last year.Robinson said the most promising part of the business was lending to the trustees of self-managed superannuation funds for property investment. He said there was plenty of interest from brokers and indications of a good business opportunity.Seiza is one of handful of lenders that have taken advantage of a change to superannuation law last year to offer loans to super funds. The market is in its early stages and appeared to suffer a setback in April when the Australian Taxation Office cautioned fund trustees about entering into certain types of loan arrangements. Among its concerns, the ATO said a regulatory issue would arise if personal guarantees given by fund members in relation to loans resulted in recourse being made to any assets of the super fund.Several lenders, including Seiza, require the members of the fund to give personal guarantees.Robinson said he was not concerned about the ATO statement. "What the ATO said was that the assets of the super fund can't be offered as a guarantee. In the loans we are writing the assets