Capital One to Close Mortgage Lender Subsidiary
Capital One said Monday it will shutter its wholesale mortgage business, a move that comes as lenders continue to struggle in the nation’s housing and home loan markets.
Capital One said it will shut down GreenPoint Mortgage and eliminate most of the 1,900 jobs it offers by the end of year.
The McLean, Virginia, company will close 31 GreenPoint locations in 19 states and “cease residential home loan origination” immediately, but said it will still honor commitments to customers with locked rates who have home loans already in the pipeline.
“Over the past few months, we have experienced an unprecedented disruption in the secondary mortgage markets,” Capital One Chairman Richard Fairbank wrote. “I made the decision with a heavy heart.”
GreenPoint, based in Novato, Calif., specializes in no-doc loans 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.”
Bart Narter, a senior analyst with Celent, a Boston-based research and consulting firm, said GreenPoint’s model - processing, packaging and selling mortgage loans to investors didn’t mix well with Capital One’s historical strengths.
“Capital One was smart to say, ‘We shouldn’t be in this business,’” Narter said.
“Capital One is in the business of understanding their customers well and keeping direct relationships with their customers. So I’m not surprised by their decision.”
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.
As the nation’s housing market has cooled, the mortgage lending industry has struggled with a dramatic rise in mortgage defaults and foreclosures.
Many home buyers have been forced into default or foreclosure problems because they haven’t been able to qualify for a mortgage refinance, or sell their homes - and end up owing more than their home is worth.
As a result, it has become more difficult for lenders like GreenPoint to turn around and effectively (and profitably) sell the mortgages they originate to investors.
SOURCE: Yahoo! Finance