Can you have a high interest pay out local bank?

Problem:
Trying to find someone with bad credit (items in collections/ money due to companies) that has money saved up.
If they had money, they would pay off their collection items and have good credit.

Problem #2:
Collection agencies tend to sue. Garnish wages and go after assets. This would make that persons income less, and they could start not making mortgage payments.
Liens can even be put on a home. Example: Back taxes
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I hope you go to college for finance.

You appear to be using non-standard terms, which makes it hard to understand what you are talking about. For instance, you don't use the term "down payment," which is what most people use. I don't understand this sentence:

"for good to stellar credit, home loans with an interest rate of 10% requiring 20% deposit and a non-interest bearing offset account, with 10% of the mortgage in it"

Are they putting down a 20% down payment, or are they putting down a 20%+10%= a 30% down payment?

My impression is that you are just requiring people to make a larger down payment, then they put the extra 10% in a "offset account." I don't see how this has any advantage over just requiring a larger down payment without putting the money in an offset account. However, maybe I understand your system improperly.

dont offer it to bad quality clients is my advice just stick to people you are sure can make the repayments. For example look at there background, education level, previous work experience, collateral such as a car or something. You have to define poor and if you go bottom feeding and all the poor people work at clothing stores and the economy takes another hit and they lose there jobs, they default as they are unlikley to find other jobs( because everyone else will be too) vs an educated skilled worker. The deeper you go into this the more tailor made your company will be and it will suit the need of you and your customer better. This is your advantage over bigger banks. :D good luck