Pepper Homeloans has emerged as the buyer of the A$5.1 billion residual home loan book of GE Capital, which the vendor said it sold at "only a very small discount" to book value.The acquisition will roughly treble the level of loans funded or under management by Pepper and help reposition the specialist financier's business towards prime home loans.The purchased loans represent three portfolios (mainly prime, but including some sub-prime loans) in Australia and New Zealand that were primarily originated by Wizard Home Loans before GE decided to drastically curtail its home loan business in late 2008.GE sold Wizard to Aussie Home Loans in early 2009, and Aussie provided incentives at the time for Wizard borrowers to refinance from loans that were (and may still be) charging interest rates well above market.Customers that have stuck with GE may be borrowers lacking the financial flexibility to refinance.Commonwealth Bank, National Australia Bank and Westpac will all provide warehouse funding to Pepper. The firm expects to refinance the GE home loan pool in the mortgage-backed securities market in coming years.Five other investors will fund the subordinated and equity tranches (for more on this see the following article).Like the other surviving specialist financiers that built a business providing non-conforming loans during the middle and later years of the long boom, Pepper's new business flows have been muted since the financial crisis. The firm has diversified into servicing mortgage books to remain viable.In mid-2010 Pepper bought a small portfolio of prime, but highly leveraged, home loans from Merrill Lynch.At around the same time Pepper Group (Singapore) Pte Limited, a special purpose holding company, led a management buyout of the group alongside institutional and high-net worth investors.Patrick Tuttle, managing director of Pepper, said, in a media briefing yesterday, that the acquisition "enables Pepper to accelerate its growth strategies and broaden its product offering from uninsured residential mortgages to a niche segment of the prime residential market.Tuttle said Pepper plans to "focus on a segment neglected by more traditional lenders since the financial crisis: small business owners and self-employed borrowers."Of Pepper's options to refinance some of the $5 billion in loans in the RMBS market, Tuttle said the company would look to do so over two to three years."We have flexibility in timing. We are not forced, but the Australian RMBS market is the most active on the planet."Skander Malcolm, CEO of GE of Capital Australia & New Zealand, said the company had  "talked to a lot of bidders" about the back book since selling Wizard to Aussie, and also selling a pool of $2.25 billion loans at the time to Commonwealth Bank."We are very happy with the price."Pepper and GE aim to finalise the sale by the end of June.