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GE warns its subprime mortgage unit could file for bankruptcy

But the business still faces legal trouble, including lawsuits from investors and an investigation by the Justice Department. GE warned in a filing on Tuesday evening that WMC could file for bankruptcy if it loses one of those lawsuits. Federal bank regulators ranked WMC as one of the worst subprime mortgage lenders in major metro areas, with more than 10,000 foreclosures between 2005 and 2007. The investors who are suing claim that WMC misrepresented the quality of the mortgages it sold. GE said WMC may file for bankruptcy if it is found liable. The TMI case is one of four pending lawsuits against WMC. Even if WMC files for bankruptcy, GE may still be on the hook for the mortgage unit's problems. The WMC bankruptcy warning and the series of lawsuits suggest that GE's losses on the mortgage business could continue to rise. Indeed, GE said in the filing on Tuesday that WMC estimates possible losses of up to $500 million above its reserves. For instance, it's not clear how much a settlement with the Justice Department would cost GE.