General Electric Co. warned it might put its dormant subprime mortgage business, long-plagued by legal trouble, into bankruptcy protection. A bankruptcy filing could be a way for the lender, WMC Mortgage, to deal with potential courtroom losses and other future liabilities, the company said late Tuesday in a filing with the Securities and Exchange Commission.


GE recently set aside a $1.5 billion reserve related to a Justice Department investigation into the WMC Mortgage business, which stopped nearly all new loan originations in 2007.


It is unclear how much exposure GE could shed by putting WMC Mortgage into bankruptcy. The process could accelerate settlements that GE agrees to fund. At a minimum, the filing would temporarily stop litigation against the unit as it looks to cap its exposure.


In the SEC filing, GE officials said they are having trouble estimating the exact loss the company could face from the Justice Department investigation and several lawsuits involving the subprime business. In February, GE disclosed that government officials are likely to claim the business violated federal lending laws in 2006 and 2007.

One case against WMC Mortgage involving $800 million in loans went to trial earlier this year in federal court in New Haven, Conn... The total claims GE faces tied to the mortgage-related lawsuits is $3.4 billion, according to regulatory filings. The company already had set aside a reserve for the lawsuits, standing at $342 million at the end of March, but said in Tuesday's filing it could face as much as $500 million in additional losses.

Comments: Be the first to add a comment

add a comment | go to forum thread