General Electric has reached “an agreement in principle” with the Department of Justice, with GE to pay a civil penalty of $1.5 billion concerning its now-defunct WMC mortgage business, the company announced in an earnings report today, Jan. 31.
The agreement is the result of an investigation the Justice Department launched in 2015 concerning alleged violations of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) by WMC in connection with the lender’s origination and sale of sub-prime mortgage loans between 2005 and 2007, GE said in a quarterly filing with the Securities and Exchange Commission in May 2018.
“The Justice Department subsequently issued subpoenas to WMC and GE Capital, and we are cooperating with the Justice Department’s investigation, including providing documents and witnesses for interviews,” GE said in that quarterly filing. It announced at that time that it had recorded a $1.5 billion reserve to cover the potential settlement, so this agreement is “consistent with the prior reserve for this matter,” GE said.
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