Nine per cent of the home loans acquired by Pepper Homeloans from GE Capital are in arrears by 30 days or more. Of those in arrears, Pepper is treating more than half as hardship cases.On Friday, Moody's Investors Service disclosed the extent of the arrears in ratings on four warehouse trusts that help fund a A$5 billion loan book acquired from GE. Three banks, Commonwealth, National and Westpac, are the primary funders to Pepper, through the warehouse trusts.A group of niche investors financed the mezzanine and equity tranches alongside Pepper. The rated trusts cover $2.5 billion of loans funded by CBA and Westpac, or about half the acquired portfolio. NAB funded the other half of the purchase, a mix of prime and non-conforming loans. NAB has not required a public rating on its warehouse trust.Pepper settled the purchase of the book from GE on Friday.The level of arrears across the four warehouse trusts ranges from eight per cent (for two trusts covering Australian loans) to 12 per cent (for two trusts covering New Zealand loans, where earthquake-affected properties in Christchurch are one factor in the higher ratio).The proportion of loans in hardship is five per cent for three trusts and seven per cent for the fourth trust.There may be some adverse selection at work, given GE's above-market pricing of the home loan book, since deciding to cease originating new loans under the former Wizard Home Loans label in late 2008.Many borrowers with the capacity to do so will have already refinanced their loans, and all borrowers were offered minor incentives to do so when Aussie Home Loans bought the Wizard franchise network from GE in early 2009.