The portfolio was administered by St Andrews Group, formerly Frontline Finance, a public but unlisted company which is in the process of being wound up and its capital returned to shareholders.
Frontline Finance sold most of its operations to Pyne Gould Corporation in December 2000.
Russell Hendry of St Andrews Group says the Direct Home Loans administration was a residual operation.
The acquisition of the about 800 mortgages, which are secured against residential properties throughout New Zealand, brings the Public Trust’s mortgage portfolio to about $165 million.
Public Trust chief executive Tim Sole says the acquisition gives the Public Trust a more substantial market presences as a mortgage finance provider.
He says people with Direct Home Loans mortgages shouldn’t be concerned about the sale because they will be treated no differently than previously.
While the Public Trust has offered home loans for more than 120 years, the emphasis in investing the company’s portfolio has been elsewhere in the past, such as investing in equities, Sole says.
But since the company moved to mark its investment to market, equities, with their tendency to produce marked swings in value, have become less favoured and highlighted the value of having a quality mortgage book, he says.
"There’s been a change in investment philosophy," and the Public Trust wants a much higher profile in the mortgage market from now on, Sole says.
The Public Trust will also be looking to buy other mortgage books, depending on their quality. "They do vary hugely in quality and stability," he says.
In October 2000, the Public Trust won a contract to manage the processing of Axa New Zealand’s mortgage business which led it to establish a "state of the art" processing unit. "We can administer these things very efficiently," Sole says.
