GE To Pay $1.5 Bln Penalty For Subprime Mortgage Misrepresentation

(RTTNews) - General Electric (GE) will pay a civil penalty of $1.5 billion to resolve claims involving subprime residential mortgage loans, the Department of Justice said.

According to DoJ, WMC Mortgage, an affiliate of GE, allegedly misrepresented the quality of its loans and the extent of internal quality and fraud controls in connection with the marketing and sale of residential mortgage-backed securities.

The DOJ used the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 to press its case against GE.

"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. The failure to disclose material deficiencies in those loans contributed to the financial crisis," said Assistant Attorney General Jody Hunt. "As today's resolution demonstrates, the Department of Justice will continue to employ FIRREA as a powerful tool for protecting our financial markets against fraud."