Last Friday, September 2nd, 2011, GE was notified for the first time, without any prior discussion, of claims against GE, GE Capital Services and certain other affiliates in a lawsuit filed at the same time as other lawsuits filed against 16 other financial institutions. The suit alleges that inaccurate statements were negligently made by a GE affiliate in offering materials in connection with the sale of two residential mortgage backed securities (RMBS) to Freddie Mac in 2005. These securities were backed by loans originated by WMC, a business GE sold in 2007. Below are some important facts regarding these claims:
- GE plans to vigorously contest these claims.
- The two transactions in question amounted to $549 million. These securities have since paid down to around $66 million in remaining principal.
- These securities held by Freddie Mac have received all interest and principal payments to date.
- GE sold the WMC business in 2007, and WMC did not originate any new loans after early 2007.