Wholesale lending at GE Capital Mortgage Corp. was way down in the first half, but the company says it has no plans to exit the wholesale business and that its volume has already rebounded.

Adverse market conditions were the reason for GE's small wholesale purchases in the first six months, according to Michael Cachel, a GE spokesman. The company's wholesale unit originated a little more than $800 million in the period, a drop of roughly 90% from the level a year earlier.

"In July and August alone, we originated $1 billion, because the market shifted toward fixed loans, which our correspondents deliver. When the product exists that we are interested in, we have a strong presence."

Mr. Cachel said the mortgage company's strategy for wholesale lending has not changed. The company will also continue its commitment to mortgage servicing and mortgage insurance, he said.

Some industry observers have noted GE's departure from the retail side of mortgage originations in August, and that its presence in wholesale lending had also declined this year. GE's originations dropped precipitously in the first six months.

David A. Olson, who runs Wholesale Access, a consultancy in Columbia, Md., said that the wholesale business has been down across the board since the beginning of the year, and GE has not suffered more than any other wholesale lender, despite industry speculation.

"There has been a lot of irrational pricing," Mr. Olson said, "and I think GE decided they didn't want to play that game."

At the heart of GE's departure from the retail scene is the imminent sale of Residential Express, GE's mortgage origination and computerized loan origination unit, to Knutson Mortgage Corp., Bloomington, Minn. Mr. Cachel declined to comment on the sale, but a well-informed source confirmed the deal. Knutson's president, Ray Warren Sims, left GE in April, reportedly because of the company's lack of interest in retail lending.

Residential Express was started by Gregory Barmore, GE Capital Mortgage's chairman, in 1991. Before it was sold, the unit was connected to 350 small banks that originated loans that were processed and underwritten by GE. The loans were then either held in portfolio by the institutions or sold to GE.

Some observers note that it will be difficult for GE to exist by concentrating on servicing without keeping up its origination capabilities. A mortgage industry insider on Wall Street said a company focusing solely on servicing without strong originations can be successful, but only if it purchases servicing at good prices.

Mortgage bankers say they hedge servicing portfolios in three ways: buying hedges, using the balance sheet of the parent company, and relying on the ability to originate, the source said. "If a company doesn't do one of those, it has to rely more heavily on the others." Relying on hedges can be expensive.

A mortgage executive who once worked at GE said the company appears to have lost its focus.

"They have to decide what they want to be, either in the mortgage business or the mortgage insurance business, because they can't do both," the executive said. He added that some of GE's insurance customers feel threatened by GE's presence in the origination arena.

Mr. Cachel said that there had been no conflicts between GE's mortgage origination business and its insurance customers.

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