KEY POINTS:
A Blue Chip investor has taken issue with a financier's claim that it does not engage in high-risk lending.
Garry Abbiss, a Palmerston North investor in the failed Blue Chip property business, said he had borrowed from Wizard Home Loans, put up for sale this week by its parent GE Money.
Wizard says it does not lend money for sub-prime or other high-risk lending, but Abbiss disagreed.
"I wonder what the loans Wizard lent to Blue Chip investors is if not high risk? I have a large loan from GE Money that is actually a Wizard loan and I have correspondence from Wizard on a Wizard letterhead to prove it," Abbiss said.
GE owns Wizard, which is one of New Zealand's largest non-bank home lenders, but GE is now examining strategic options for the Wizard lending network which could include a partnership, joint venture or sale.
During the process Wizard will keep offering loans and existing services.
Wizard says: "Wizard Home Loans is part of the General Electric Group. Because Wizard is part of GE, we do not raise our funds from the public. Instead, we fund our products through General Electric Treasury. This means that we are largely unaffected by the current economic conditions.
"As New Zealand's largest prime, alternative lender (ie, we do not provide sub-prime or high risk lending), we are well placed to continue to offer our customers competitive and secure products."
John Grant, director New Zealand business for GE Money Home Lending, said his firm had only about 8 per cent of an estimated 3500 loans which people had taken out with various financiers after investing in Blue Chip.
Some of GE or Wizard's clients were in financial distress but some were not, he said.
"We understand some people are in a distressed position and [are] trying to make contact with most of them. We're working through every single available option," Grant said, and this could ultimately result in the sale of a property used as collateral.
But lenders could not be blamed for bad decisions made by people, he said.
"People get very excited about, say, a business venture and put their house up as collateral but in reality the business turns out to be nothing like they thought it would be. Because they have made the decision and decided to use the house as collateral, is that the lender's fault? Do we make a judgement call about whether they are doing the right thing or not?"
His firm was not part of any of the Blue Chip decision-making but was just presented with loans. If these met certain criteria, they would be accepted, he said.
Grant said he was surprised to read this month that barrister Paul Dale planned to seek injunctions against finance companies involved in Blue Chip properties in cases where the loan application documents could be false or fraudulent.
Dale said mortgages should be set aside and GE Finance is one of his targets in aiming to stop mortgagee sales of houses owned by Blue Chip clients.
Grant said he had not heard directly from Dale.
Wizard has 30 branches in New Zealand and GE's decision this week to examine a sale had created a level of uncertainty, Grant said.
"We're focused on the day-to-day running of the business."
