Wizard Home Loans franchise holder Robert Janssen says the decision by the firm's parent company to shut down the mortgage operation came as a shock to himself and his staff.
GE Money announced on Wednesday it was closing the operation because of the global financial crisis and New Zealand home loan market conditions.
The company had earlier tried to sell the business but a buyer or strategic partner could not be found.
Dunedin franchisee Robert Janssen said having the axe fall just before Christmas has been devastating.
However he said his Wizard Home Loans franchise had already been approached by other mortgage companies.
GE Money said it would continue to service all existing loans, worth about $1bn, but Wizard Home Loans branches would stop writing further business at a date still to be determined.
The move is separate from developments in Australia, where National Australia Bank is in advanced negotiations to buy Wizard Homes Loans.
Lincoln University professor of property studies Chris Eves said if further second-tier lenders close down, the losers will be the first home buyers the companies catered for.
He said says many parent companies are in difficulty, and non-bank lenders without a good range of deposits to access will find current conditions difficult.
Professor Eves said a telling factor for other lenders will be whether the housing market improves.
