GE sees subprime woes spreading

NEW YORK (CNNMoney.com) -- General Electric sees problems growing from subprime loans into other types of mortgages, it said Friday.

Chief Executive Jeff Immelt told analysts that the company was starting to see an increase in delinquencies in Alt-A loans as well as subprime mortgages.

Alt-A loans are those where borrowers aren't required to submit as much documentation of income as straight mortgages.

The company's WMC Mortgage unit is the nation's No. 5 lender to people with less than top credit ratings, a sector known as subprime lending which has been battered by rising delinquencies and defaults recently.

The No. 2 subprime mortgage lender, New Century (Charts), filed for bankruptcy protection on April 2, while the No. 1 subprime lender, HSBC (Charts), has taken a $10.6 billion charge for bad loans, primarily in its U.S. mortgage unit.

"We're seeing some pressure in Alt-A loans as well," he said. "Subprime delinquencies started ticking up in the summer of last year, and Alt-A delinquencies started ticking up in the fall."

"Subprime delinquency rates are still 50 percent higher than Alt-A rates," he added.

WMC is the nation's No. 8 Alt-A mortgage lender.

Including Alt-A and subprime loans, the company made $50 billion in mortgages in 2006, according to Inside Mortgage Finance, a trade publication.

GE also said that it expects to sell its struggling plastics division by the third quarter, which is the period from July through September.

"The plastics transaction is on track," Immelt said on the conference call.

GE announced in January that it would put the division up for auction, and it expects a first round of bids soon.

The plastics business could be worth as much as $10 billion, said analysts surveyed by Reuters. Potential suitors include BASF (Charts), Dow Chemical (Charts) and Saudi Arabia's Saudi Basic Industries.

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Nail that sale!