After three years in the business, GE Money Canada said it has stopped taking new mortgage applications. It's the latest in a string of alternative lenders that have decided to scale back operations or close shop amid the credit crunch.
Lenders who relied on bundling and selling loans to fund new mortgages have run into trouble as the securitization market went dry.
GE uses its own capital to fund mortgages, and in its case the decision is part of a broader corporate strategy to shift away from consumer financing, said Stephen Motta, chief executive officer of GE Money Canada.
"This was precipitated by the credit market turmoil, and the need to deploy capital more effectively," Mr. Motta said.
The business is worth less than $1-billion and has 50 employees, some of whom will find new jobs within GE.
GE exited its U.S. subprime lending business in July, 2007, and has been scaling back its mortgage operations around the world. Just recently the company said it was realigning its operations to focus on its core business areas: infrastructure, media and finance.
The company is also considering strategic options for its credit card operations, including GE Money Canada's business primarily consisting of private label cards, Mr. Motta said. However it will continue to focus on expanding a division that provides loans for power sports equipment and other big-ticket items.
Other foreign-based lenders that have recently departed the Canadian mortgage lending market include HSBC Financial Corp. Ltd. and Accredited Home Lenders.
"This is the one major, direct impact on the Canadian mortgage market from what's happened in the U.S.," said Jim Murphy, president of Canadian Association of Accredited Mortgage Professionals. "My concern is that fewer mortgage providers means less choice and options for Canadian borrowers."
GE Money Canada will finish processing current mortgage applications, and will hold existing mortgages on its books until their terms conclude.