HSBC Shuts U.S. Subprime Unit, Cuts 750 Jobs
HSBC,Europe's biggest bank, said it would close its U.S. subprime mortgage unit, cutting 750 jobs and taking an $880 million writedown, because the business is no longer sustainable.
For HSBC, which is under pressure from activist investors to shake up its corporate governance, it was the latest blow from the meltdown in the U.S. market for loans to home buyers with poor credit histories.
Decision One has restructured operations in the past year as defaults on risky subprime loans to people with weak credit have escalated. The unit centralized loan processing and underwriting and reduced the number of operating centers to two from 17.
Decision One relies on a network of independent mortgage brokers to find borrowers and to submit loan applications, a model that has been curtailed or discontinued by other lenders burned by lax underwriting standards and outright fraud.
In the first six months of this year, HSBC sold about $371 million in loans originated by Decision One to its U.S. bank and recorded a pretax loss of $400,000 from the deal.
In contrast, HSBC booked a $17 million pretax gain on Decision One loan sales during the fourth quarter of 2006, its financial statements show.
Earlier on Friday Reuters reported that Decision One had scheduled a management conference call with its staff amid concern about layoffs or a winding down of operations.