Pepper signed the agreement on Wednesday, supported by a consortium of institutional banks and mezzanine investors including Commonwealth Bank, National Australia Bank and Westpac Banking Corporation.
It says the acquisition is one of the biggest loan transactions in Australian history and will transform the company.
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The deal is expected to be complete in coming months.The sale included home loans from the original Wizard Home Loans mortgage book and GE Money home loans originated through third parties including brokers and aggregators, GE Capital said in a statement.
Pepper's executive chairman, Mike Culhane, said the deal would enable the company to grow assets at a time when non-bank lenders were trying to increase their share of the home loan market.
Pepper has issued $2.5 billion of residential mortgage-backed securities via eight transactions since 2003 and will issue more over the next few years subject to market conditions, he added.
A wholly-owned subsidiary of Pepper Group (Singapore) Pte Ltd, Pepper's current warehouse funding partners include CBA and NAB.
Managing director and chief executive Patrick Tuttle said the acquisition would allow Pepper the opportunity to expand into prime residential lending.
The deal comes three years after the then GE Money announced it would make a staged exit from the home lending market when the 2008 credit crisis left many low-documentation lenders reeling.
Extreme volatility in global and local wholesale funding markets was to blame for GE Money's withdrawal from the home lending sector, its local chief executive Mike Cutter said in December 2008 after announcing the sale of Wizard Home Loans to rival Aussie Home Loans.
The sale allowed CBA, part owner of Aussie, to acquire $2 billion of mortgages originated by Wizard.
The default rate on the Wizard book was around three per cent - about 2.5 times higher than the default rate on the loan book of the average bank.
"This sale is consistent with GE's strategy to reduce GE Capital to approximately 30 per cent to 40 per cent of the global business," Mr Cutter said at the time.
GE Capital's parent, global conglomerate General Electric Inc, started offloading assets within its financial services arm in 2008 after suffering heavy falls in group earnings from profit declines at GE Money.
The giant's core earnings for the March quarter 2011 jumped by 48 per cent to $US3.4 billion ($A3.24 billion).
Source http://news.smh.com.au/
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