Bluestone Mortgages – Another Casualty of the Credit Crunch?


Industry sources are today circulating news that Bluestone Mortgages has stopped residential originations and is yet another casualty of the Credit Crisis.

Representatives from Bluestone have been contacting their clients advising that they will no longer accept new originations and current pipeline loans will not be able to be funded.

It had been expected that Bluestone would continue to settle a select number of deals per month for their top tier brokers until a future warehouse had been secured, but sources state that Westpac suddenly stopped whatever little funds were left.

If these reports are true, then where does this leave Bluestone?

Lending Central contacted Bluestone Founder and Executive Chairman Alistair Jeffery to set the record straight.  “We have decided to cease accepting new originations and will not be able to fund some of our pipeline, a decision we very much regret for the brokers and customers involved”.

Jeffery cited warehouse issues with its current provider Westpac as the reason for the decision and re-iterated that this decision has no bearing on the financial stability of the Bluestone Group.

“Westpac has lost their mojo when it comes to non-bank funding. We felt it was a better use of our time figuring out how the non-bank sector should be structured after the financial storm passes, rather than continually bickering with a reluctant funder just to retain a small origination flow”.

Whilst Jeffery was not prepared to make any “on the record” comments as to the exact nature of the issues, or whether this decision is the end of their relationship with Westpac, it would be safe to assume that Westpac is trying the recoup some of the higher costs of funding that are associated with RMBS deals in the current market.

“Bluestone has the best servicing platform in the non-conforming space, so to have to cease origination because of our warehouse provider does not sit well for our industry.  I don’t think it’s a long term problem for us and we are confident a solution can be reached in the coming months, but it’s a safe bet to say that the new model won’t be dependent on bank support. Having a bank dependency in a non-bank business model is like putting Dracula in charge of a blood bank” stated Jeffery. “It’s too tempting to eat the customers!”.

Whilst Bluestone could have continued to fund on their Westpac warehouse the resultant need to pass on the higher costs would not have been in the best interests of its clients.

In February, Bluestone reported a strong lift in profitability in the first half of the financial year, which is expected to have continued through to the full year result which will be announced in the coming weeks.

Earlier in the year the business launched Bluestone Servicing to handle the back-office administration of other Australian and New Zealand lenders, and the unit has recently won its first pure third party servicing mandate.  Bluestone has also recently bolstered this business through the acquisition of a finance receivables ledger from the receivers of Provincial Finance Limited and will continue on the acquisitions path to build this business.

What are your thoughts on the issue? Are Bluestone the last or will be there more?

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  1. It’s amazed me that given the credit markets have been damaged most by the sub-prime crisis that Australian sub-prime lenders have been able to do business at all. I’m not saying that the Australian subprime lenders have been at fault unlike the incredibly stupid lending going on in the US but if investors are baulking at buying prime RMBS, what hope would sub-prime lenders have (innocent or not)

  2. Wow! Big news, the first of a few I think that will have problems long term.

    And amazingly candid comments from Alistair Jeffery


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