Mortgage giant GE Capital Mortgage Corp. says it will no longer make home loans directly to the public.
The retail marketing efforts have never been a big source of loans, and the company has decided to wind down the business over the next few months, according to a spokesman.
"It would take too much in the way of resources to focus on those areas to ever be extremely profitable," said spokesman Michael J. Kachel.
"We just decided to affirm our current and longtime strategy of focusing on servicing and insurance," he said.
Retail originations accounted for only $66 million, or 7% of total originations, in the first half of this year, Mr. Kachel said.
Several sources outside the company said the exit was apparently hastened by losses in retail.
The retail program never took off, said one source, and the executive in charge of it, Ray Sims, left GE several months ago when it became clear that the company would change its strategy.
Mr. Sims now holds the No. 2 position at Knutson Mortgage Corp., Bloomington, Minn.
"There has been more sizzle than there was substance" to the program, according to another knowledgeable source who is close to executives at GE.
The program has lost money and is being eliminated as part of a broad directive from parent GE Capital to build income at the mortgage unit, the source said.
Gregory Barmore, chairman of the unit, began the program in 1991 through a turnkey computerized loan originations system called Residential Express. At the moment, the product links about 350 small banks with GE.
The banks originate loans that are then processed and underwritten by GE. The loans are either held in portfolio by the institutions or sold to GE.
Just recently, GE expanded its reach by entering into an agreement with the Western Independent Bankers, a group that represents community banks in the West. Under the deal, member banks gained access to the computerized originations system.
Mr. Kachel emphasized that GE would continue to honor its existing commitments as it wraps up the business over the next few months.
The company also recently explored affinity lending deals but did not enter any, Mr. Kachel said.
In such deals, groups such as large employers or associations contract with lenders to make home loans on favorable terms.
As part of its exit from the retail business, GE will not pursue any further affinity lending deals, Mr. Kachel said.
GE's role as an aggressive wholesale lender has for some time been an irritant in its relationship with its mortgage insurance customers. Retail originations have never been significant, so they have been less of an issue.
Still, one large lender, Countrywide Funding Corp., Pasadena, Calif., praised GE's exit.
"I'm glad that they're doing it," said Stan Kurland, president. He added, however, that it was not a big-enough event to relieve competitive pressures in the industry.
