AIG’s Wilmington settles with OTS

One of AIG’s subprime units settled with the Office of Thrift Supervision over inappropriate loans to some borrowers and excessive fees.
Wilmington Finance Inc., a Plymouth, Pa.-based subsidiary of American International Group Inc., provided extensive loan-origination services for AIG Federal Savings Bank from July 2003 to May 2006.
The bank, however, failed to manage and control its activities in a safe and sound manner and didn’t consider consumer-protection issues appropriately, the OTS said.
Wilmington originated subprime home loans that were inappropriate for some borrowers, and the firm didn’t properly consider their ability to repay the debt, the government agency said.
As part of the agreement with OTS, three of its subsidiaries—AIG Federal Savings Bank, American General Finance Inc. and Wilmington Finance Inc.—will implement program to provide affordable loans to certain borrowers facing a high risk of foreclosure.
Additionally, AIG said that it will donate a total of $15 million, over a three-year period, to certain not-for-profit organizations to support their efforts to promote financial literacy and credit counseling.
AIG said it set aside $128 million to pay for the program, but needs to set aside an additional $50 million reserve to pay for the program and the $15 million donation.