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New Zealand’s mortgage lender Southern Cross Financial has obtained a P2P lending license from the country’s Financial Markets Authority (FMA).
According to the company statement, this makes it the first significant mortgage lender in New Zealand to transition to a peer-to-peer lending model. According to the company’s CEO Luke Jackson, this was a natural step for the company.
He also clarified that with the new license Southern Cross Financial is abandoning its current model through the contributory mortgage way of doing business. In his words, the decision was prompted by changes in legislation, which made this model unviable for the company and it sought a new way of doing business. The transition from a contributory mortgage company to a P2P lender, in Jackson’s words, was a “natural fit”.
The conversion of Southern Cross Partners’ business model is scheduled for 1 December this year. Once the transition is completed, the company will be the biggest peer-to-peer mortgage lender in New Zealand.
Unlike the other P2P mortgage lenders, however, Southern Cross Financial would front the risk by lending the money first, before offering investors an opportunity to buy the mortgage.
“We only provide loans through our platform that we have initially funded ourselves. While all our loans are equally made available to all our investors, if for whatever reason a loan is not taken up by the investors we are more than happy to retain it,” Jackson said. “Unlike other peer-to-peer lenders our loans are secured by the property, and we’ve been doing this for a very long time – we have the systems, processes, experience and backing that not only survived, but grew, through the global financial crisis,” he added.
Further Jackson clarified that the majority of mortgage borrowers with Southern Cross Financial were taking short-term loans – an average of 12 months or less.
Southern Cross Financial was established in 2007 and since 2003 is part of the Southern Cross Financial Group. The primary purpose of the company is providing funding for property secured loans in good locations throughout New Zealand.