Pepper Homeloans chief executive John Empey announced his resignation yesterday. Empey, who joined Pepper from ING in 2006, will leave on February 1 and will hand the reins to the company's chief financial officer Patrick Tuttle.Empey's departure is the culmination of a review of the non-conforming lender's strategy that resulted in redundancies and changes to lending criteria late last year.Pepper retrenched 19 staff in October. At the time Empey said the company was setting itself for what it expected to be a medium term slowdown in the market for mortgage backed securities. Around the same time Pepper discontinued two loan products, Xpress and Mega Xpress. Both were sold to near-prime credits. It was a part of the Pepper business that Empey described as high volume and low margin.Among other changes, Pepper took its maximum loan to valuation ratio down from 90 to 85 per cent and made its LVRs hard capped, which means that fees and other costs cannot be capitalised above the maximum.Customers were no longer being offered a 12-month discount of one per cent on their non-conforming and low-doc loans. The one per cent loyalty bonus, for borrowers whose loans passed three years, was dropped.Tuttle said yesterday that the focus of the business would now be more on working with banks and investors to secure funding, and less on the sales and marketing functions that were Empey's strengths.Pepper is in the final stages of negotiating a third warehouse facility. It has a total of $800 million of funding from Commonwealth Bank and Barclays Capital and is lining up another $400 million facility.Pepper completed the sale of  $200 million of mortgage backed securities, Pepper Residential Securities Trust No 7, at the end of November. It paid 85 basis points over the bank bill swap rate on the $130 million super senior Class A tranche.When it did an RMBS issue last March it paid 18 points over swap for the senior tranche.Tuttle said: "That shift has a powerful influence on our lending. My job now is to write as good a pool as I can in terms of credit quality. We need to be very selective."Pepper has the lowest arrears rate in the non-conforming market - 7.5 per cent of its securitised loans are 30 days in arrears, compared to the sector average of 13.5 per cent.Tuttle intends to keep it that way. "We are looking for clear credit non-conforming borrowers. In this market it is very useful to be able to point to a strong track record. "You have to build for the business cycles."Tuttle denied the suggestion that Pepper's owner, London-based Oakwood Global Finance, had the business on the market."In the fourth quarter last year we did a lot of work with Oakwood on our business plan. That resulted in a substantial capital injection. They are committed to the business."