Bloomberg reports this morning
General Electric Co. plans to sell WMC Mortgage, the company's three-year-old U.S. subprime mortgage unit, following a surge in defaults by borrowers.
"The mortgage industry has greatly changed since the purchase of WMC,'' Laurent Bossard, chief executive officer of the division, said in an e-mail to employees yesterday. "The current subprime market environment has made a significant negative impact on the business.''
GE's a little late to the party on this, of course, as scores of subprime lenders including Fremont, Option One, Accredited and others have either been looking for or have found buyers in recent months. Which raises the question of whether the GE unit will be able to find a buyer at a level GE would like -- or if GE, like many in the subprime space, will divest of WMC as part of a fire sale to push the money-losing unit off of its books.
Most recently, WMC was named in a potential class-action suit filed by the NAACP this week which charges the lender (among others) with discriminating against minority borrowers
. The lender was also called out by Moody's earlier in the week
for being one of four lenders whose 2006 originations are driving much of the subprime mortgage bond market's poor performance to date.
WMC laid off half of its workforce
in April amid the downturn in the subprime lending space.
According to the Bloomberg report
, Countrywide CEO Angelo Mozilo is likely happy to see so many players running for the exits:
"GE's been in and out of the mortgage business before,'' said Angelo Mozilo, chief executive officer of Countrywide Financial Corp. His Calabasas, California-based company, the country's largest home lender, has said it expects to benefit as weaker rivals or competitors less dedicated to mortgages disappear during a difficult period for the cyclical business.