Financial crisis to blame for Wizard Home Loans closure

[muppet]

Financial crisis to blame for Wizard Home Loans closure

12:35PM Wednesday Dec 17, 2008








Wizard Home Loans, which once claimed to be New Zealand's fastest growing alternative home lender, is the latest casualty of the global financial crisis.
Owner GE Money said it was closing the business. GE had previously announced it was ceasing offering home loans through third parties and was exiting the motor finance and small business financing market.
Today it said the decision to close Wizard in New Zealand was made reluctantly. There was no immediate estimate of job losses.
The decision was a result of the global financial crisis. The business was no longer viable because of extreme volatility and greatly increased cost of funds, coupled with the New Zealand mortgage market conditions.
During a review of the business announced in May, a buyer or strategic partner for Wizard Home Loans in New Zealand could not be found.
GE Money will continue to service all existing loans in the normal way. Wizard branches in New Zealand will cease writing new business at a date to be determined in discussions with the branch licensees.
"This was a difficult decision, and no reflection on the tremendous contribution made by the Wizard management and employees who have shown great loyalty to the brand and the business," said GE Money Australia and New Zealand chief executive Mike Cutter.
GE Money still has a retail store finance, personal loans and insurance business in New Zealand.
- NZPA

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10548537

[Davo36]

Gee that's pretty serious, wonder how many employees, offices etc. they have.

David

[Dean@Massiveaction]

Been coming for ages Davo, sad but not a surprise.

[donna]

The local office near us closed a few months ago.

cheers,

Donna

[muppet]

Wizard to continue servicing $1b in loans despite closure

Updated 3:43PM Wednesday Dec 17, 2008







The closure of Wizard Home Loans will see 25 branches close and more than 80 people looking for new jobs, as life gets tough for non-bank mortgage lenders.
Wizard owner GE Money said it was closing the business but would continue to service about 4000 existing loans worth about $1 billion.
The decision comes after a buyer or strategic partner for Wizard in New Zealand could not be found following a review of the business announced in May.
A number of other lenders have also exited the mortgage market in the last few months.
GE Money says the New Zealand closure has no bearing on the ongoing Wizard review in Australia, where National Australia Bank has said that it was in talks to acquire the distribution network and A$4 billion ($2.8 billion) of prime mortgages from Wizard.
Wizard once claimed to be New Zealand's fastest growing alternative home lender backed with the financial strength of one of the world's largest companies.
However, it said the decision to close was a result of the global financial crisis.
The business was no longer viable because of extreme volatility and greatly increased cost of funds, coupled with the New Zealand mortgage market conditions.
Geoff Lynch, GE Money's Australia and New Zealand corporate finance manager, said there were 25 Wizard branches owned and managed by licensees, not employed directly by GE Money.
About 75 people were involved in those branches.
Six employees and two contractors of GE Money would also lose their jobs.
GE Money was now talking to Wizard licensees about closing down the branches and arranging an orderly transition, he said.
Once that understanding with licensees had been sorted out GE Money would write to the customers with the new contact details.
"They (Wizard licensees) have been doing it tough for some months, it has been a really, really difficult environment we have been operating in and we have held on for as long as we can."
GE Money still has a retail store finance, personal loans and insurance business in New Zealand.
Wizard's demise did not come as a surprise, said David Tripe, director of Massey University's Centre for Banking Studies.
GE Money had been a great user of the international commercial paper market for its funding and therefore was being squeezed along with everybody else in that market, he said.
Wizard was not a big player, as banks controlled over 90 per cent of the mortgage market, he said.
Circumstances may well prove somewhat difficult for other non-bank lenders unless they were raising funds through retail deposits of one sort or another.
Building societies, raising money through retail deposits and acting in a more bank like way, should be all right, he said.
"Generally we haven't had the extent of non-bank lenders as they have in other markets but there were a number of low profile offshoots of some of the Australian mortgage lenders.
"They have become even lower in profile and that reflects their general difficulty in being able to raise funds by offering packages of mortgages to the market to underpin securitisation issues."
Mike Pero, director of mortgage broker Mike Pero Mortgages, said that while his company did not use Wizard, a number of non-bank lenders were not lending any more and a number seemed to have dropped off.
"A lot have been filtered out and there will be more of those in the next year."
But there were still some out there.
"You do need non-bank lenders for the non-traditional or non-vanilla type loans."
- NZPA

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10548569