General Electric became the latest group to admit defeat in America’s sub-prime home loan market as it announced plans to sell its WMC Mortgage unit.

The sale would bring the number of mortgage lenders that have closed, gone into bankruptcy or been sold to more than 60 in the past 18 months as a trickle of defaults on high-risk subprime mortgages has turned into a flood. New Century Financial and ResMae are among the biggest subprime lenders forced into bankruptcy in recent months.

GE has been frantically selling WMC’s loans since April, when it blamed bad debts at the unit for a $373 million (£183 million) decline in first-quarter profits at its financial services group.

The conglomerate also wrote down the value of its remaining home loans by $500 million and cut its workforce by about 1,000, or 40 per cent.

GE has since sold on about $3.7 billion worth of WMC’s mortgage book, leaving it with about $1 billion in loans. Analysts said WMC could be of interest to a rival mortgage lender or a hedge fund, which could potentially repackage its loan book and sell it for a profit.

GE announced its disposal plans as the American Government sought to persuade the Chinese administration to prop up its mortgage market. Representatives of the US Department of Housing and Urban Development were in Beijing yesterday trying to tap China’s $1.33 trillion of foreign currency reserves as the growing level of defaults continued to deter many traditional investors in bonds backed by subprime loans.

On Thursday, it emerged that mortgage banks were expected to foreclose on 1.8 million home loans this year, representing a 44 per cent increase on 2006. RealtyTrac, which made the forecast, blamed the escalation on subprime mortgages and suggested that defaults were likely to “spike” in the autumn.

The expected growth of foreclosures has increased nervousness about subprime loans among groups such as GE and the sell-off at rock-bottom prices of properties with a defaulted mortgage is expected to increase over the next few months. Meanwhile, lenders are making far fewer high-risk loans and finding it more difficult to package them into bonds and sell them on to hedge funds and institutions.

Suspicions that America’s subprime woes had reached Asia heightened yesterday when Moody’s, the ratings agency, announced it was investigating the region’s exposure to high-risk US home loans, to see if any of its banks merited a credit rerating.

GE announced its disposal plans as it reported a 12 per cent rise in its second-quarter group profits to $5.4 billion, as sales rose by 12 per cent to $42.3 billion. GE Money, the group’s financial services division, shrugged off its mortgage woes to report an 8 per cent rise in profits as revenues increased by 17 per cent.

GE also confirmed that it would double its share buyback programme, to $14 billion, with $12 billion of the stock to be repurchased this year.

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