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.

  1. Couple of items are not correct in your story above.
    1) Ge did securitize mortgages they pooled them off once insured
    2) The employees are not being dispersed into other GE businesses most are being given 2 weeks pay, and a selected few will remain to clear up files for 8 weeks.
    The source of your information must have been GE PR department, as it is incorrect.

  2. John,
    You are the one who is incorrect, about almost all of your points. The only thing you may be close to being correct o nis the dispersal of employees. It is a big company with lots of other opportunities that I am sure will be made available to qualified people.

  3. Sorry John. GE Money Canada kept the mortgages on its books and relied on the deep pockets of its parent GE for funding.
    Wells Fargo Financial Canada and Citi Financial Canada follow the same model.
    They do not securitize mortgages through the NHA/CMB program nor through the now dead non-bank ABCP market.
    BDMs at Wells and Citi told me that directly.

  4. Believe what you want, they did sale there books, in the beginning they used the parent GE for capital, then they had to sell off, ask Joe Vecherelli directly (President) if honest he will tell you the truth.
    Secondly, GE put a freeze on any GE Money employees transferring to any other division within GE, so again you are incorrect–there are no options for the GE Money employees.
    I am aware of how Wells and Citi operate.

  5. John, you are wrong and continue to be wrong.
    1st) You claim to have spoken to the President, but can’t even spell his name? It’s V-E-C-K-E-R-E-L-L-I. (oh and you used the wrong tense for THEIR not There.)
    2nd) All of the fundings came from the GE Treasury department, there was no pooled money and the mortgages were definately kept on the books, as the only way they stayed insulated from the asset back comercial paper crash, was using their own money and keeping all of the deals on the books.
    3rd.)There was a freeze on the employees that has been lifted. They are free to go where ever they want, internal or external. There are plenty of options for GE employees.
    I know because my spouse worked there for a few years until recently and we have many friends in the sales, credit and on the management team. My information is “certified and true.” Yours is incorrect, as I stated above.

  6. Ooops I spelt his name wrong–I was not aware this was a spelling bee.
    Anyway, we will agree to disagree, and you should read things more carefully, where did I claim to speak with him? I know my comments to be correct, through contacts.
    Secondly, they lifted the freeze–funny, the entire GE corporation is in a freeze, in case you have not read a paper of late–they are selling off, closing, liquidating divisions regularly, so where exactly are the GE Money employees going? There are no options from within.
    The internal movement freeze was put on the GE Money employees when GE decided to sell/look for a buyer of the division–the TD/company TD had a hand-in was looking to buy GE Money, that fell through, and here we are now GE Money is no longer.

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