Eagle-Pacific Home Loans is offering the "non-conforming" product through the 40 Mortgage Link offices with Eagle Finance, also based in Nelson, providing the back-office administration and the Palmerston North-based Speirs Group providing the funding.
The group won’t say how much demand they’re finding, but Eagle Finance managing directorJohn Jannetto says Pacific Home Loans is lending between $400 million and $600 million a year through the Mortgage Link network.
"We think there’s probably market demand, just through that network, of somewhere between $50 million and $70 million a year" for the non-conforming product. Jannetto says.
Under the non-conforming product, Eagle Pacific will lend up to 70% of a property’s value at a fixed interest rate for three years only. It has two classes of borrowers, the B class which is charged 10.5% interest and the more risky C class which is charged 11.5% interest.
The idea is that at the end of the three years, if there are no problems, the borrower will have established a good enough credit record to be able to borrow from the banks again.
The kind of people the product is aimed at are the recently self employed or others who haven’t built up a sufficient track record to satisfy banks, those who were previously bankrupt or who have other "credit issues."
David Smart, funding general manger at Speirs, says the potential borrower is "not necessarily a credit impaired person."
For example, a young professional couple returning from their OE might both have well paying jobs but lack a credit history.
The group would also consider someone bankrupted eight years ago but who has a good credit history over the last four years or so. "But if you were bankrupted last week and you didn’t have a job you wouldn’t apply," Smart says.
Jannetto says banks are becoming more and more restrictive and won’t look at people with even minor credit issues. "In some instances, they’re really telling people, `we don’t want your business.’ There are probably more people who have negative credit records than those who have positive records," he says.
So how did the three companies involved get together? Jannetto says he and Mortgage Link founder Roger Poulter met at the gym. Poulter became acquainted with Smart when the latter was working for the Public Trust and Mortgage Link was marketing Public Trust home loans.
