Blue Chip victims in panic to make deals

Helene Philpott, a victim of Blue Chip, with dog Anna. Photo / Martin Hunter

Blue Chip victims are racing to make deals with financier GE Capital before the sale of its loan book goes through at the end of the month.

GE has announced it is quitting the mortgage market and is selling its book to Australian company Pepper for A$5 billion ($6.5 billion).

It is reportedly one of the largest whole-loan transactions in Australian history.

About 300 victims of the Blue Chip collapse have been left with mortgages to GE, and many have no way to repay them.

The lender has said it will not put anyone on the street and has assured Blue Chip borrowers that Pepper will honour any hardship arrangements already in place.

But Brian Ellis, an Auckland lawyer representing more than 400 Blue Chip victims, said many people were panicking over the Pepper deal.

"We know where we stand with GE," he said.

Only about 20 of the investors had taken "lifetime leases", which allow them to live in their homes until they die, at which time GE will take the property.

It meant they would never be able to downsize or move into a retirement village if the home became too much for them.

But that left several hundred victims who needed to negotiate other arrangements with the lender, Ellis said.

One lower-North Island victim has resisted all attempts by GE to recover its loan - until now. "They've been very, very aggressive with me and I've just stood up to them," he said.

"The whole thing which really broke me was the announcement they were selling the mortgages to Pepper. And I realised then I was doomed."

The 50-year-old put a $167,000 deposit on a yet-to-be-built Auckland apartment.

But it turned out Blue Chip had no right to sell the property and the deposit was not held in trust for him.

GE had said he did not qualify for its hardship provisions because he had been unco-operative, he said.

Christchurch widow Helene Philpott has just settled her loan with GE.

She also invested in an apartment that Blue Chip had no rights to, and her deposit was passed to another Blue Chip company rather than held in trust.

Like many other victims she did not know she had been described as "self employed" on loan documentation to get the mortgage with GE across the line.

Philpott said she had offered to repay the principal of her loan but GE turned her down.

The lender eventually discounted some of the interest owed "because of the Christchurch earthquake".

The 73-year-old, whose only income is the pension, has managed to raise most of the $185,000 owed but has taken out a $35,000 mortgage - guaranteed by her son - to cover the shortfall.

GE had played hardball, she said. "I hate the very name of them. It makes me a different person from what I am.

"I get so angry and so agitated and uptight about them, I just want to go there and slap everyone's face."

A GE spokesman said the lender was not able to comment on the Blue Chip settlements at this stage, but would be making an announcement in coming weeks.

Lawyer 'failed basics'

One bright spot for victims of the Blue Chip collapse has been the number of successful cases brought against lawyers Jonathan Mathias and Zel Unkovich who failed to advise investors properly.

Auckland barrister Daniel Grove is handling the lion's share of the proceedings and says about 15 cases have been resolved, with 50 more in the pipeline. The resolutions are confidential.

The cases have been issued following the Auckland District Court ruling last year against Unkovich.

The lawyer was ordered to pay Pukekohe couple Carl and Rachel Bilbe $160,000 in compensation after "failing in his basic duty to his clients to see that they understood the transaction".

Judge David Wilson QC said the Bilbes' Blue Chip agreement was "so unusual and risky that any reasonably competent conveyancing solicitor would have been duty-bound to draw the risks to his clients' attention".

The couple lost the entire investment when the scheme collapsed.

GE Capital cleans up with $80m net profit

Financier GE Capital has announced a net profit of $80 million for this year.

The company had not revealed its New Zealand accounts before but was trying to be more transparent, said managing director Aaron Baxter. The profit was generated off a New Zealand asset base of $2.4 billion.

Following the cleanout of the finance-company sector, GE saw an opportunity to reposition itself as the country's leading financial-services provider, he said.

Owned by United States corporate General Electric, just over half of GE's business in New Zealand was consumer lending and insurance while the rest was commercial lending.

It was pouring a chunk of its profit into a new credit-card product which would be launched this year, Baxter said.