DOJ: GE to Pay $1.5 Billion Civil Penalty to Resolve Claims Involving Subprime Mortgage Loans
April 12 2019 - 1:38PM
Dow Jones News
By Michael Dabaie
General Electric Co. (GE) agreed to pay a civil penalty of $1.5
billion to resolve claims involving subprime residential mortgage
loans originated by WMC Mortgage, the U.S. Justice Department said
Friday.
General Electric Capital Corp. acquired WMC, a subprime
residential mortgage loan originator, in 2004, the Justice
Department said.
The Justice Department said WMC, GE and affiliates allegedly
misrepresented the quality of WMC's loans and the extent of WMC's
internal quality and fraud controls in connection with the
marketing and sale of residential mortgage-backed securities.
The settlement contains no admission of any allegations and
concludes the Financial Institutions Reform, Recovery, and
Enforcement Act investigation of WMC, a GE spokesperson said. "This
is another step in our ongoing efforts to de-risk GE Capital. This
agreement represents a significant part of the total legacy
exposure associated with WMC and we are pleased to put this matter
behind us," GE said.
GE, which had disclosed the tentative agreement in January, last
year had recorded a $1.5 billion reserve in connection with the
federal investigation.
The Justice Department alleged that in 2005 to 2007, WMC
attempted to increase its profits and meet profit goals by
increasing originations. WMC loan analysts responsible for
underwriting mortgage loans were encouraged to approve loans in
order to meet volume targets, even where the loan applications
didn't meet the criteria outlined in WMC's published underwriting
guidelines, and received additional compensation based on the
number of mortgages they approved, DOJ said. At the same time,
there were significant deficiencies with respect to WMC's quality
control, the Justice Department said.
Write to Michael Dabaie at michael.dabaie@wsj.com
(END) Dow Jones Newswires
April 12, 2019 13:23 ET (17:23 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
GE Aerospace (NYSE:GE)
Historical Stock Chart
From Aug 2024 to Sep 2024
GE Aerospace (NYSE:GE)
Historical Stock Chart
From Sep 2023 to Sep 2024