GE Money adopts new subprime standard

General Electric Co.”™s WMC Mortgage Corp. unit reportedly became among the first subprime lenders to adopt proposed federal guidelines on balloon mortgages to people with problem credit.
The guidelines address subprime mortgages that offer initial low, fixed rates that later escalate, directing lenders to assess a borrowers”™ ability to repay loans at the escalated rates.
According to the Wall Street Journal, the new standard could lead WMC to make half as many hybrid adjustable-rate mortgages. WMC was the fifth-largest subprime lender in the nation last year, the newspaper reported citing statistics from Inside B&C Lending, a trade publication.
First Franklin Financial Corp., a San Jose, Calif.-based subsidiary of Merrill Lynch & Co., is also adhering to the new guidelines.
WMC is based in Burbank, Calif.; GE purchased the company in 2004 from Apollo Management L.P., a private equity firm.
Last November, GE Money installed Laurent Bossard as president of WMC. In March, WMC laid off 460 workers as a result of the subprime lending market woes.