A restoration of margins on a declining lending portfolio and increased revenues from an expanded group of mortgage broking platforms enabled Challenger to maintain earnings on its mortgage management business over the December 2008 half year.Challenger said its return on net assets in mortgage management was steady at 22 per cent in the December 2008 half, up from 20 per cent in the June 2008 half, but steady with the December 2007 half.The lending book declined by 15 per cent to $19.8 billion over the year to December 2008. Uncompetitive pricing by Challenger and thus its network of third-party mortgage managers may have encouraged borrowers to refinance with banks.Challenger presumably maintained its access to warehouse funding from banks for its mortgage business, but did not say what level of warehouse funding was available to the group.The group holds some hope that the market for mortgage-backed securities may reopen, based on improving price trends in the cost of bank debt. However, Challenger is also a support of widening government guarantees on financial liabilities to cover mortgage-backed bonds. Thanks to takeovers last year Challenger has $71 billion in mortgages under administration through the group's ownership or controlling stakes in PLAN and Choice, and minority stakes in Fast and Homeloans, and which Challenger estimates represent around 40 per cent of the mortgage broking market.At a group level Challenger Financial Services Group reported a net loss of $108 million for the six months to December 2008, thanks to write downs on investments in the main life company. Normalised net profit increased four per cent to $106 million.