Click here to join our mailing list to receive the latest news and updates as they happen. Unsubscribe any time.

GE Money Pulling Out of Canada

GE-Money GE Money is now the latest casualty of the lingering subprime crisis.  The lender will stop taking new applications effective Thursday.  (Globe story)

The company, just three years old, carved out a niche in “alternative” lending, with lending guidelines that were looser than most.  Now it wants to shift away from consumer financing.  It’s CEO, Stephen Motta, said: “This was precipitated by the credit market turmoil, and the need to deploy capital more effectively.” 

GE shuttered its U.S. mortgage operation in July 2007.

One of the things that made GE Money unique was that it kept mortgages on its books instead of selling them all off to investors (securitizing them).  This insulated them somewhat from the problems other Canadian lenders have been having in raising capital.

The only ones happy about this announcement will likely be the few remaining subprime lenders and Canada’s private lenders.  Both will now be able to charge higher rates and be more selective in what business they take.

Borrowers with weak credit or untraditional financing needs will be less happy.  For them, another big option has just disappeared.  CAAMP’s Jim Murphy said, “This is the one major, direct impact on the Canadian mortgage market from what’s happened in the U.S.”

GE will honour all applications in its pipeline and continue to hold all existing mortgages on its balance sheet until maturity.  Naturally, GE Money will no longer be renewing existing mortgages.

GE Money’s Canadian operations are valued at about $980 million.  It’s 50 Canadian workers will reportedly transfer to other GE units.  Other big lenders exiting the Canadian market in the last year include Accredited Home Lenders, HSBC Finance, and GMAC.

Thankfully, GE’s commercial mortgage division (GE Capital) will continue operating in Canada.  However, times are challenging in the commercial lending market as well.  According to sources, GE Capital’s commercial lending competition has dropped from about 20 lenders a year ago down to five or so today.