Magazine article American Banker

GE Capital Joins the Rush to Subprime Loan Market

Magazine article American Banker

GE Capital Joins the Rush to Subprime Loan Market

Article excerpt

Following the lead of other large lenders, a unit of GE Capital will be entering the B and C loan arena this month.

The mortgage funding division, which handles home equity lending for GE Capital Mortgage Services Inc., is starting a program to originate loans to borrowers with subprime credit.

The company is going to keep its strategy flexible and either securitize loans or hold them for investment, according to a report in Home Equity News, a trade newsletter. GE Capital Mortgage will also retain most of the servicing.

GE Capital is joining the ranks of Chase, Chemical, Norwest Mortgage Corp., and GMAC Mortgage - not to mention several smaller lenders. Most have jumped on the A-minus, B, C, and even D bandwagons in the past 24 months.

"Everyone has started to focus their attention (on subprime loans)," said Kevin Duignan, director of residential mortgage services at Fitch Investors Service Inc., New York. "And GE already has presence on the home equity side."

But is the market reaching the saturation point? It's too early to tell. "It's a market that will always be there, regardless of the number of players," said Mr. Duignan. "But there is not necessarily the volume to support all the players looking at it."

Executives at GE Capital are confident that there is room for them. "Some of the players in the market have jumped in from a different basis," said Paul B. Conway Jr., vice president of home equity sales for GE Capital. "But with our customer base, we're confident there is room for us in the market. …

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