Mortgage Lender Alleges Breach of Contract by ANZ and Columbus

Pioneer Mortgage Services Pty, a Queensland-based lender, sued Australia & New Zealand Banking Group Ltd. (ANZ) and Columbus Capital Pty, alleging breach of contract regarding a portfolio of mortgages.

Pioneer accused the two of going against the terms of agreements relating to mortgages that Columbus Capital bought from ANZ, the nation’s third-largest bank, last year. The loans in the portfolio were provided to homeowners under different brands, including Pioneer’s, and were used as collateral for a A$500 million ($519 million) sale of residential mortgage-backed securities this month.

Pioneer is claiming damages for losses suffered as a result of the alleged breach, according to court-stamped copies of filings obtained by Bloomberg News. It’s also challenging ANZ’s ability to transfer its rights and obligations under the mortgage origination and management deed, the filings show.

Australian mortgage demand has steadily declined since the global credit crunch which was deepened by the collapse of Lehman Brothers Holdings Inc. in 2008, spurring competition among lenders. The nation’s homeowners are among the world’s most reliable at repaying their loans, and arrears are expected to remain low this year, according to a Mortgage and Housing Outlook published by Fitch Ratings in January.

Origin Takeover

Loans to purchase houses increased at an annual rate of 4.4 percent in January, from a 12 percent pace five years earlier, central bank data show.

Columbus Capital bought the mortgage distribution business known as Origin Mortgage Management Services from ANZ in September.

Origin Mortgage Management funds approximately A$2.2 billion of home loans via a network of mortgage managers which originate and manage the loans under their own brands, ANZ said in a press release at the time of the acquisition. ANZ agreed to provide transitional services to Columbus Capital for as long as a year after the sale was completed, the bank said in the statement.

“We will defend our rights in this matter,” Andrew Chepul, executive director at Columbus Capital, said in an e- mailed response to a request for comment today.

Paul Edwards, a Melbourne-based spokesman at ANZ, declined to comment on the case when contacted on his mobile phone today.

Columbus Capital priced A$454 million of the securities in its RMBS offering at 120 basis points more than the bank bill swap rate on March 4, its first issuance in almost five years, data compiled by Bloomberg show. Overseas investors bought 46 percent of the notes, a person familiar with the matter said at the time.

To contact the reporters on this story: Rachel Evans in Hong Kong at revans43@bloomberg.net; Joe Schneider in Sydney at jschneider5@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net

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