The global credit crisis has claimed another victim in the Canadian mortgage industry asGeneral Electric Co. winds up its mortgage operations here.
After three years in the business, GE Money Canada said it will stop taking new mortgage applications tomorrow. It’s the latest in a string of alternative lenders that have decided to scale back operations or close shop amid the credit crunch.
Lenders who relied on bundling and selling loans to fund new mortgages have run into trouble as the securitization market went dry.
GE uses its own capital to fund mortgages, and in its case the decision is part of a broader corporate strategy to shift away from consumer financing, said Stephen Motta, chief executive officer of GE Money Canada.
“This was precipitated by the credit market turmoil, and the need to deploy capital more effectively,” Mr. Motta said.
The business is worth less than $1-billion and has 50 employees, some of whom will find new jobs within GE.
GE exited its U.S. subprime lending business in July, 2007, and has been scaling back its mortgage operations around the world. Last week the company said it was realigning its operations to focus on its core business areas: infrastructure, media and finance.
The company is also considering strategic options for its credit card operations, including GE Money Canada’s business primarily consisting of private label cards, Mr. Motta said. However it will continue to focus on expanding a division that provides loans for power sports equipment and other big-ticket items.
Other foreign-based lenders that have recently departed the Canadian mortgage lending market include HSBC Financial Corp. Ltd. and Accredited Home Lenders.
“This is the one major, direct impact on the Canadian mortgage market from what’s happened in the U.S.,” said Jim Murphy, president of Canadian Association of Accredited Mortgage Professionals. “My concern is that fewer mortgage providers means less choice and options for Canadian borrowers.”
GE Money Canada will finish processing current mortgage applications, and will hold existing mortgages on its books until their terms conclude.
This is what I was sent as one of their brokers:
To our broker partners,
| GE Money wishes to advise that, effective at the close of business this coming Thursday, July 31, we will no longer be accepting mortgage applications. This difficult decision to wind down our mortgage business in Canada comes as a result of a lengthy analysis of our global business, as GE and GE Money continue to apply investment capital in areas providing the best potential return for our shareholders.
Though we will stop taking mortgage applications as of Thursday, we will fund our outstanding commitments.
We are grateful to our employees, and to our many broker and business partners who assisted in the development and launch of our mortgage products across Canada. Our first priority today is to assist the members of our talented team who have been impacted by the announcement with the transition to the next steps in their careers. |
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| Best regards,
Joe Veckerelli
President, GE Money-Mortgages |
This is my take, another one bites the dust. For those of you who are keeping track here is a list of lenders who have pulled Alt-A or Sub Prime products or left the market all together. If I have left anybody out please let me know. Accredited Home Lenders, Abode Mortgage, GE Money, GMAC-RFC, Money Connect, myNext Mortgage Company, N-Brook, ResMor Trust, Street Capital, Interbay and Xceed. At this point I must give a shout out to Wells Fargo for sticking it out and hanging in with us. Thank You.
Cheers,
Pat
