|
CNBC'S MOST SHARED
- Unemployed? Bored? Make Money Playing Beer Pong
- The Highest Grossing (Inflation Adjusted) Movies of All Time
- Social Networking's 'Naked' Truth
- Geek Squad V. Gizmodo
- Merrill's McCann Seen as UBS Wealth Frontrunner
- Warren Buffett's Top Three Investment Rules for the Average American
- Why You Should Watch Fund Flows
- WPP's Sir Martin Sorrell on the Ad Recession
- Four Things You Should Be Doing Now To Break Out
- Proprietary Trading May Cause October Crash: Investor
- Cheney Told CIA to Withhold Information: Report
- Why the Credit Pendulum Is Stuck at 'Stupid'
- Stimulus Will Kick in Later this Year: President Obama
- Lender CIT Group Hires Premier Bankruptcy Adviser
- Government Selling Bank Stakes for Too Cheap: Panel
- Buffett's Top 3 Investment Rules for Average Americans
- Market Insider: Earnings Loom in the Week Ahead
- Bulls Get Summertime Blues, But It's Hot Fun for Bears
- As Banks Fail, Strong Institutions Become More Visible
- Eric Schmidt on Government Scrutiny and Economic Recovery
- Market 360: The Week's Best & Worst
- Geek Squad V. Gizmodo
- Brandt: Google Chrome OS in the Post-PC Age
- Other People Are Weirder Than We Are
- Bank Failures: Is The Nightmare Over? (Video)
- California Here I Go? No.
- Roginsky: No More Mr. Nice Guy
- Commercial Conundrum
Capital One Financial said Monday it will cut 1,900 jobs and shutter its wholesale mortgage banking business, a move that comes as lenders continue to struggle in the nation's housing and mortgage markets.
Capital One said it will shut down GreenPoint Mortgage and eliminate most of the jobs by the end of year. The company will "cease residential mortgage origination" effective immediately and close GreenPoint's Novato, California, headquarters and 31 locations in 19 states.
The company said it will honor commitments to customers with locked rates who have loans already in the pipeline.
"Over the past few months, we have experienced an unprecedented disruption in the secondary mortgage markets," Capital One Chairman and Chief Executive Officer Richard D. Fairbank wrote in an internal memo to employees. "I made the decision to wind down the business with a heavy heart."
GreenPoint specializes in no-documentation and Alt-A mortgage loans for borrowers with slightly better credit than subprime borrowers. In his memo, Fairbank said that market has seen a "significant reduction in liquidity and continuing volatility."
The decision to close GreenPoint will hit McLean, Virginia-based Capital One with an $860 million charge, or $2.15 per share, the vast majority of which will come in 2007. Capital One lowered its 2007 earnings guidance by 14% to $5 per share.
Analysts polled by Thomson Financial expected earnings of $7.05 per share. Analysts estimates typically exclude one-time charges.
Capital One made the announcement after markets closed Monday. Its shares [COF
Loading...
()
] fell $2.03, or 3%, to close at $66.72. They fell an additional $1.64, or 2.4% to $65.08 in extended trading after Capital One's announcement.
Capital One said its other business lines remain solid and in line with expectations, adding that it will continue to sell home loans through Capital One Home Loans and its bank branches.
"Capital One's other businesses are supported by ample liquidity and funding including deep access to deposits, a 'stockpile' of subordinated credit card funding in place that allows approximately $9 billion of AAA credit card funding going forward, and a $25 billion portfolio of highly liquid securities," Perlin said.
As the U.S. housing market has cooled, the mortgage lending industry has struggled with a dramatic rise in mortgage defaults and foreclosures. Many homebuyers have been forced into default or foreclosure because they haven't been able to sell their homes or end up owing more than their home is worth.
As a result, it has become more difficult for lenders like GreenPoint to sell the mortgages they originate to investors.
"The reductions in demand and pricing in the secondary mortgage markets make it difficult to operate our wholesale mortgage banking business profitably," said Gary Perlin, Capital One's chief financial officer.








