April 13 (UPI) — General Electric agreed to pay a $1.5 billion fine to resolve allegations the company misrepresented subprime mortgage loans issued by a subsidiary of the company, the Department of Justice said Friday.
The Justice Department accused the now-defunct WMC Mortgage of misrepresenting the quality of the loans, and the fraud controls relating to the marketing of residential mortgage-backed securities.
“The financial system counts on originators, which are in the best position to know the true condition of their mortgage loans, to make accurate and complete representations about their products,” Assistant Attorney General Jody Hunt said. “The failure to disclose material deficiencies in those loans contributed to the financial crisis.”
WMC originated more than $65 billion in mortgage loans between 2005 and 2007. The Justice Department said investors lost billions as a result of the company’s fraudulent origination and sale of loans.
“This settlement contains no admission of any allegations and concludes the FIRREA investigation of WMC,” GE said in a statement to CNBC. “This is another step in our ongoing efforts to de-risk GE Capital. This agreement represents a significant part of the total legacy exposure associated with WMC and we are pleased to put this matter behind us.