Suggestions made last week that Pepper Australia's A$500 million securitisation of non-conforming mortgages was comparable to US sub-prime instruments that triggered the financial crisis has drawn fire from the lender's co-chief executive officer, Patrick Tuttle."As far as we're concerned this is just business as usual," Tuttle said. "In fact, the market should be welcoming the fact that we can fund ourselves reasonably efficiently, and see that as a sign of returning competition to the non-bank sector."To suggest these loans equate to US sub-prime is just nonsense."The deal included a US$200 million tranche with a one-year maturity, intended to appeal to US money market funds. Sarah Samson, director of debt markets at National Australia Bank, one of the lead managers on the deal, said it was the largest Australian pure non-conforming RMBS transaction completed since the financial crisis.It is also Pepper's 12th non-conforming securitisation, which highlights the lender's experience as a manager and servicer of securitised transactions, according to a Moody's media statement."Our latest deal into the US was rated by both S&P and Moody's, all the way down capital structure, from AAA to single B, which is sub-investment grade," Tuttle said."All the investors were institutional fixed income fund managers who are very familiar with our company, our lending standards and the way that we service the loans. They know the underlying collateral that supports our deals. In many cases, these fund managers have been investing in our program since 2003." Tuttle added that the credit performance of Australian non-conforming RMBS, from 2006 until today has been strong and arrears levels have been "well within regular expectations". Losses in his Pepper's RMBS portfolios have remained very low, he said."We're lending to customers who just fall outside traditional bank criteria and offer them a pretty attractive rate, albeit just a bit higher than the bank rate," Tuttle said. "In fact, we are doing more of the underwriting manually, which the banks can't really accommodate through their automated scoring models," he said.Typically, these customers might be looking to consolidate more than three or four credit cards and a personal loan into their mortgage and thereby exceed debt limits; may have had an illness or a divorce or were temporarily unemployed and therefore have "a black mark" on their credit bureau report; or are self-employed but late with their tax returns, requiring a lender to confirm their income through alternative means, such as business activity statements."Our processes allow us to verify their capacity to repay their loans," said Tuttle. "US sub-prime is a completely different animal. In many cases, the borrowers didn't even have jobs and were being given loans by US lenders."