Lombard coy on investor returns

Investors in contributory mortgages offered by Lombard Financial Services should know in six months if they will get their money back.

Around 200 investors are owed a collective $7 million - money Lombard collected from small investors, pooled and lent out mainly as mortgages on commercial premises nationwide.

More than two years ago, Lombard Financial Services (a standalone company not related to other Lombard Group businesses) said it was exiting the contributory mortgage business as regulator concern over that type of investment heightened.

At its peak Lombard - which has two former cabinet ministers on its board - had $200 million in contributory mortgages lent out, said chief executive Michael Reeves.

"Contributories became non-flavoursome," he said.

 

The relative unpopularity of contributory mortgages reflects the high risk involved. Developers seek such finance only if bank lending is not available, and the high interest rates reflect that increased risk.

Last March, a Companies Office report showed 14 schemes owed the company a total of $33 million in outstanding principal and debt. Reeves said this amount was now down to $7 million.

Confirming the planned timing for winding up the remaining contributory mortgage, Reeves was coy on the chances of fully recovering the remaining $7 million owed.

"It's really up to the borrowers to perform, not Lombard.

"To act in the investors' interest, we have to ensure the buildings are sold in an orderly fashion [to maximise price]. That takes time," Reeves said.

* The liquidation of finance company Finance Money Centre has left unsecured creditors with little chance of recovering their investments.

Liquidator John Whittfield said the wind-up was in its very early stages and the investigation has not been started - meaning he was not sure of the number and amount of creditors and any likely assets or income stream. That said, he conceded the situation did not look promising for unsecured creditors.

An initial liquidation report suggests around $100,000 was owed.

One lender, a woman who contacted the Business Herald but did not want to be named, said her family had lent $20,000 to the company - which traded as Impact Finance - in the middle of last year.

Concerned that a loan agreement did not arrive, she tried to contact Impact and retrieve her money.

Despite numerous attempts over several months, the woman has not seen a penny and is now under financial pressure.

"I know there are lots of other families in this same position."Other business interests were not involved, Whittfield said.