NEW YORK: The Justice Department announced Friday that General Electric has agreed to pay $1.5 billion over subprime mortgages, finalizing a settlement on conduct prior to the 2008 financial crisis.
GE had announced a preliminary agreement on the subprime case in January, but the Department of Justice (DOJ) said the matter was now resolved.
The alleged violation came from subprime residential mortgage originator WMC, which GE acquired in 2004 and which went on to originate more than $65 billion in mortgages between 2005 and 2007, the DOJ said.
These mortgages, later bought by investment banks and repackaged, in many cases were approved despite not meeting criteria as WMC sought to boost loan volume, said the DOJ.
WMC’s statements were reviewed or made with knowledge of people from GE, the DOJ said.
US officials have cracked down on numerous banks and other financial players over similar allegations tied to subprime mortgages since 2008.
“The financial system counts on originators, which are in the best position to know the true condition of their mortgage loans, to make accurate and complete representations about their products,” said Assistant Attorney General Jody Hunt.
“The failure to disclose material deficiencies in those loans contributed to the financial crisis.”
The settlement comes as newly-installed GE Chief Executive Larry Culp tries to turn around the company, which has been in a bruising two-year slump due in part to weakness in its power division.- AFP
