Pepper Australia has recovered the ground it lost during the financial crisis, adding close to A$500 million of loans to its non-conforming portfolio last year.According to a Standard & Poor's evaluation published last week of Pepper's loan servicing capacity, Pepper had slightly less than $3 billion in residential mortgages in Australia at the end of January.Of the $3 billion, $1.53 billion is non-conforming and sub-prime loans, while the balance of $1.46 billion is prime loans.Pepper's non-conforming lending business hit a peak in late 2007, when its portfolio was worth around $1.5 billion.Like other non-conforming lenders, Pepper was not able to get funding during the financial crisis and the value of its portfolio fell to around $500 million by mid-2011.In May of that year, Pepper acquired $5 billion of prime and non-conforming loans in Australia and New Zealand from GE Capital.Since then the non-conforming business has been in recovery and by the end of last year had regained its pre-GFC high.One reason for the recovery is that the funding market is investing in non-conforming securities again. Pepper completed two issues of non-conforming residential mortgage-backed securities last year, raising a total of $700 million, as well as $500 million of prime RMBS.Of the $3 billion or so of prime Australian mortgages that Pepper bought from GE three years ago, less than half remains on the books. The $1.46 billion prime mortgage balance at the end of January was made up of the balance of the GE book plus new prime lending that Pepper has done.Despite the rapid run-off in the GE book, Pepper's chief financial officer Todd Lawler said the company was very happy to have made the acquisition."It gave us scale, allowing us to set up our servicing operations and expand our systems. And it opened the door to international contacts because people saw that we were capable of executing a large transaction," Lawler said.