GE Plans to Sell Subprime Mortgage Unit
General Electric has decided to sell its WMC Mortgage subprime lending business, the lender told employees in a memo Thursday.
"The mortgage industry has greatly changed since the purchase of WMC," wrote Laurent Bossard, president and chief executive of WMC, in the memo to employees. "The current sub-prime market environment has made a significant negative impact on the business."
The memo said GE would disclose the plan in a conference call Friday when it is due to report second-quarter financial results and that Morgan Stanley had been selected to advise on the deal.
A spokesman for Fairfield, Connecticut-based GE declined to comment.
Defaults in the subprime lending market, which focuses on less-creditworthy borrowers, have surged this year, causing about 50 subprime lenders to close.
Burbank, California-based WMC, which GE bought in 2004, has been a thorn in the conglomerate's side in recent months. The lender cut back sharply on new loans and laid off more than 1,200 staffers, cutting its head count to about 700.
In the second quarter, WMC sold off about $3 billion in non-prime loans, cutting its exposure to the market by about two-thirds.
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