|HSBC North America is throwing in the towel on its U.S. consumer finance operations -- impacting more than 5,000 employees. The company began the massive dismantling of its U.S. empire in 2007.
In 2003, HSBC plunked down more than $14 billion to acquire Household International Inc. At the time, Household operated 1,400 offices in 46 states.
The deal included Beneficial Corp. -- which Household acquired in 1998 for $8.6 billion.
HSBC's acquisition was made in the midst of the biggest refinance wave in U.S. history -- with annual residential originations reaching a record $3.8 trillion in 2003 -- and just prior to the subprime explosion that ultimately led to a global financial meltdown.
"This is a great opportunity for us to strengthen both HSBC and Household's business in a way that benefits both sets of shareholders," HSBC Group Chairman Sir John Bond said in 2002 before the merger. "This deal brings together one of the world's most successful deposit gatherers with one of the world's largest generators of assets.
"It is an extremely good match."
By 2004, annual mortgage originations exceeded $31 billion and the mortgage servicing portfolio exceeded $60 billion.
Today, the company said it will shut down that business.
"HSBC Finance Corp. today announced the discontinuation of loan originations of all products by its consumer lending business," a press release said. "The consumer lending branch offices, branded in the U.S. as HFC and Beneficial, will cease taking new loan applications as soon as practical and substantially all branch offices will be closed as soon as commitments to customers are satisfied."
The disclosure came as the firm's London-based parent, HSBC Holding plc, reported $15.5 billion in losses for North America last year.
HSBC said lending models that depend on wholesale markets for funding are no longer viable.
The company said it intends to service its mortgage portfolio until it runs off.
A spokeswoman told MortgageDaily.com in a statement that today's move will impact around 5,400 people. Those employees will be given 30 days' notice and provided with details about benefits, severance, internal job opportunities and outplacement services.
"We saw the disruption in subprime lending as early as 2006 and sharply scaled back in 2007 while others continued to grow," HSBC said in today's earnings report.
The scaling back included the closure of HSBC Mortgage Services' correspondent acquisition channel in April 2007; the closing of a Carmel, Ind., retail lending facility in August 2007 by HSBC Finance Corp.; the shut down of subprime wholesale lending subsidiary Decision One Mortgage during September 2007; the closing of HSBC Mortgage Corp.'s indirect lending channel in November 2008; and the shut down of HSBC retail subsidiary Solstice Capital in December 2008.
In today's statement, the spokeswoman indicated that HSBC Mortgage Corp. will continue to originate loans in bank branches.