GE's WMC Mortgage loans hit subprime index

By Al Yoon - Analysis

NEW YORK (Reuters) - General Electric Co.'s (GE.N: 株価, 企業情報, レポート) subprime mortgage unit is responsible for some of the worst-performing loans in the benchmark index for the $575 billion market for home equity asset-backed securities, showing few lenders are immune to recent U.S. housing sector problems.

Losses on more than $2.6 billion in loans issued by WMC Mortgage, a Burbank, California-based unit of GE Money Bank, are expected to top 15 percent, the highest projected rate of any bond in the widely watched ABX derivative index of bonds issued in early 2006, a UBS Securities model showed.

The ABX-HE 06-2 index of subprime mortgage securities plunged as much as a third this year as concern that bonds and companies represented don't fully reflect potential losses created by loans to the riskiest borrowers.

The drop in the ABX index itself fueled a sell off in risky assets by investors who have been using the index as a leading indicator of sentiment in 2007.

WMC on Friday said it would lay off 460 employees, or about 20 percent of its staff, as the subprime market contracts.

"As is well known, the subprime/Alt-A industry is in a period of stress, and WMC is not immune to the factors of affecting the entire industry," said spokeswoman Brandie Young. She called the UBS report "flawed," saying it is based on a small portion of WMC loan originations.

WMC closed two branches, said Mitch Freifeld, whose Clearwater, Florida-based Branch Management Solutions broker-service company has a relationship with WMC.