Collapse Of New Zealand "Guarantor" Puts 10,000 Homes At Risk

Authored by Mike Shedlock via MishTalk,

Guaranteeing things is an excellent business until it fails suddenly and completely.

In the Great Financial Crisis guarantors were wiped out. It's happening now down under where 10,000 Property Buyers are Caught in the Collapse of Deposit Power.

A leading national property finance company has collapsed potentially leaving an estimated 10,000 residential, commercial and property investors in the lurch about the fate of nearly $300 million worth of deposits.

Deposit Power, which provided interim finance to property buyers, has closed its doors after the collapse of New Zealand's CBL's insurance, which was an issuer and guarantor of deposit bonds.

Sale Complications

Worried mortgage brokers, who recommended the products to clients, are seeking advice on whether clients need to buy other cover, or secure additional or replacement financial risk bonds. It could mean unspecified risks, uncertainty and deal delays for tens of thousands of counter parties, financiers and their representatives, including lawyers and other brokers.

Mortgage brokers, who act as an intermediary between borrowers and lenders, are being warned the status of existing loan guarantees is unknown, pending applications will not be processed and no payments have been taken.

Investors calling the Sydney-based office are being answered by a recorded message the company is facing "external issues" and that it is unable to process any deals.

Deposit Power's bonds were sold to individuals, first time buyers, retirees, self-employed borrowers, trusts, corporate entities, or self managed super funds purchasing commercial or residential property. It was established in 2012 and regulated by the Australian Securities and Investments Commission.

They were also heavily marketed to first time and off the plan property investors. A deposit guarantee is an alternative method of placing a deposit on a property.

CBL in Interim Liquidation

The New Zealand High Court last month ordered CBL Insurance be placed in interim liquidation on an application by the Reserve Bank of New Zealand as the insurer's prudential supervisor.

In New Zealand, liquidators are warning those insured by CBL, or any beneficiaries of its policies, to seek advice on whether they need to buy other cover or secure additional, or replacement financial risk bonds.

Information Lacking

According to the article, CBL has yet to inform Australian liquidators about whether Sydney-based Deposit Power will fully, or partially, back the bonds.

Here's a hint: When authorities shut down guarantors, it's because they have gone bust. The question is not whether anyone will be fully paid back, it's whether anyone will be paid back anything.

Guarantee Scams

Guarantors make money in good times but because of leverage they go bust in bad times. In the case of CBL, we see the true nature of its guarantee: It was worthless.


Mouldy Fri, 03/09/2018 - 02:52 Permalink

3 greatest lies in NZ.

My house is insured.

My mother was a Maori princess.

My uncle was just helping that sheep over the fence.

popeye kralizec Fri, 03/09/2018 - 16:36 Permalink

I guess Mish didn't read the article, which itself was poorly written.

I hadn't heard of this, so did some digging...

Deposit Power is an Australian company, and the deposits referred to relate to the Australian property market.

CBL Insurance is a NZ insurance company with operations in several countries, particularly France. CBL sells 10 year build quality guarantees on new homes, and sold deposit guarantees to Deposit Power in Australia.

The CBL French arm got into trouble, impacting the solvency of the NZ parent. The parent then made two international transfers of funds in contravention of Reserve Bank of NZ instructions, potentially further threatening its solvency.

With CBLI placed in interim liquidation by RBNZ to protect the asset base (preventing further dispositions of cash assets), the ability of Deposit Power to honour house deposits in Australia is uncertain.

In NZ, build guarantees may prove to be worthless. However, NZ home owners still have the ability to pursue civil claims against the individuals responsible for unsatisfactory build quality (in NZ, it is the tradesman who is personally liable, not the building company or subcontracting company).

In reply to by kralizec

goldpeace Fri, 03/09/2018 - 03:11 Permalink

3 biggest lies in Australia

- We're much better than the All Blacks

- Our national anthem doesn't sound like a nursery rhyme

- we're not ©unts

Jack Oliver Fri, 03/09/2018 - 04:05 Permalink


The New Zealand High Court last month ordered CBL Insurance be placed in interim liquidation on an application by the Reserve Bank of New Zealand as the insurer's . 

THAT would be the Rothschild’s ‘Reserve’ Bank !! 


Looks like they may be getting ready to make some room for their insidious BRETHREN !!! 



lincolnsteffens Stan Smith Fri, 03/09/2018 - 10:15 Permalink

Been there. Lots of good things about it and some not so good. Just like most other places. Big immigrant population from Asia and S.E. Asia, Japan, China and India.

If you are over 50 don't imagine emigrating there unless you have big bucks to leave in a bank or invest in a business that will employ many. The Kiwis are also of a British mentality in that there is only one correct way to do something, so don't rock the boat and conform.

In reply to by Stan Smith

commoncourtesy Fri, 03/09/2018 - 05:50 Permalink

I don't see the problem. It is not real money (Gold or silver) anyway, right?

It is just worthless I.O.U's on cheap paper that we all pass on to someone else (like a hot potato) or computer digits.

Can debt pay for other debt?

In any case how can some fool GUARANTOR another fools debt with more debt?

buttmint Fri, 03/09/2018 - 06:33 Permalink

... Heard on the street (and totally woo-woo) New Zealand and Australia are supposed to be Gateway to All Things Antarctica.  As in UFOs, new power supplies,  Atlantis, Giants and... the damn list is endless! 

Paul Ron Fri, 03/09/2018 - 09:41 Permalink

Could this be the start of it? The first domino? The ripple that turns into a tidal wave? Lets hope so. The sooner this monster fake world economy is slain the better.