A revaluation of loans held for sale pushed Pepper Australia into the red in 2007.Pepper reported a loss of $4.2 million for the 18 months to December 2007, a considerable turnaround from a profit of $7 million in the 12 months to June 2006.The firm is one of a handful of funders specialising in non-conforming lending. It had a portfolio of loans under management of about $1.5 billion at December 2007, of which only half is consolidated within the financial statements. Of this, $543 million was funded through a warehouse line and the balance was funded through three securitisation trusts. Pepper reported revenue of $120 million from mortgages over the extended financial year. This included $65 million in interest revenue, $19 million in fee revenue, and $23 million profit from the sale of mortgage portfolios.Patrick Tuttle, chief executive of Pepper, wrote in an email yesterday that "a key contributor to the 18-month reported loss was the requirement for us to fair value the loan portfolio held within our warehouse trusts as at December 2007.  "Our Oakwood Group accounting policies require us to record loan book values on a held-for-trading basis for the financial year ended 31 December 2007. The reduction in fair value reflects increased funding costs due to the ongoing illiquidity in global debt capital markets."The cash flow statement shows Pepper funded $1.4 billion in new loans over the 18-month period, up from $430 million in the year to June 2006.National Australia Bank provided Pepper with a $200 million warehouse line in April 2008.Tuttle also clarified details of additional capital obtained by Pepper late last year. He wrote that this included an additional working capital funding of $20 million in second half 2007, $15 million from Oakwood and $5 million via a working capital facility from an Australian major bank. At December 2007, $14 million of this additional funding remained undrawn.