The American giant is cutting its sub-prime mortgage business adrift as the below par credit lending market worsens. By: Dearbail Jordan
General Electric (GE), the US conglomerate, confirmed today that it is offloading its sub-prime mortgage business as American-based banks increase the number of foreclosures (or repossessions) on homeowners with a poor credit history.
GE announced the sale of WMC Mortgage Securities as part of its second quarter trading statement that revealed an increase in sales to $42.3 billion, above $39.9 billion recorded in the same period last year and above market estimates of $41.7 billion.
The conglomerate bought WMC just three years ago, and since then has reduced staff numbers by 1,200 to 700 employees due to the deteriorating sub-prime lending market as well as shearing back the amount of mortgages its grants to people with a poor credit history.
Despite the challenging market, GE money - the division that houses WMC - showed an eight per cent increase in profits during the second quarter.
GE's decision emerged as the number of foreclosures on home loans in the US leapt by 87 per cent during June, compared to the same period last year. Around 720,000 Americans are expected to be left without a house as banks repossess homes following borrowers' failure to make mortgage payments during a 90-day period.
The number of loan foreclosures in the States hit 925,987 during the first half of the year, compared to 1.25 million over the whole of 2006 and 857,000 recorded in 2005.
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