Capital One Financial Corp. is closing its wholesale lending subsidiary.
The McLean, Va.-based financial services giant announced today it would immediately shutter its GreenPoint Mortgage subsidiary. The move will result in layoffs by Dec. 31 for 1,900 employees in 31 locations and the headquarters in Novato, Calif.
"Current conditions in the secondary mortgage markets create significant near-term profitability challenges, given the company's 'originate and sell' business model," the statement said. "Further, recent and continuing developments in the mortgage markets reduce the long- term outlook for profitability in the business, as the company expects markets for prime, non-conforming mortgage products are likely to remain challenged for the foreseeable future."
Capital One recently revised its earnings guidance down after first quarter mortgage production of $6.8 billion came in 27 percent below the level in the fourth quarter and the mortgage banking business posted a "modest" loss.
In June, GreenPoint laid off 440 people -- about 15 percent of its workforce, a spokeswoman told MortgageDaily.com. It also closed 12 operational centers.
GreenPoint will honor currently locked loan commitments, the announcement said.
Employees of Overland Park, Kan.-based Capital One Home Loans will not be affected by today's abrupt actions, the report indicated. In addition, plans are to hold on to its $12.5 billion mortgage portfolio of loans of held for investment by Hibernia and North Fork Bank at the time they were acquired.
Included in that portfolio are $0.7 billion in GreenPoint seconds, Capital One said. Exposure to an additional $2.6 billion in GreenPoint second lien loans held for sale will be kept by Capital One until they can be sold.
"Capital One intends to continue to originate and sell mortgage loans through Home Loans and its bank branches where it has direct interactions with customers, rather than brokers, which provides greater control of the underwriting and origination process," according to the press release.
Capital One will take an $860 million charge in connection with the closing, including $650 million in the noncash writedown of goodwill recorded with the acquisition of GreenPoint, which Capital One inherited with its acquisition of North Fork Bancorporation in December 2006. It will also honor repurchase requests per GreenPoint's outstanding representations and warranties.
"The reductions in demand and pricing in the secondary mortgage markets make it difficult to operate our wholesale mortgage banking business profitably," Capital One Chief Financial Officer Gary Perlin said in today's announcement.