Capital One to Shut Mortgage Unit GreenPoint Mortgage

Effective immediately Capital One is sutting down its mortgage unit GreenPoint Mortgage. The companys stock is taking a beating. The damage continues.

There's not a lot of new on this yet but it looks like Capital One is shutting down its mortgage unit.  Capital One expects that the total after-tax charge associated with this closure will be approximately $860 million, or $2.15 per share. 

"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. "Beyond that, 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."

What's interesting is that the release sounded very pessimistic on the longer-term mortgage trends.  As it states:

" 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. "

1,900 positions will be eliminated as a result of this decision, the majority by year-end.

On the markets, Capital One shares dropped 5% to $63.38.

 

Sol Nasisi
Sol Nasisi: Sol Nasisi is the co-founder and a past president of BestCashCow, an online resource for comprehensive bank rate information. In this capacity, he closely followed rate trends for all savings-related and loan products and the impact of rate fluctuations on the economy. He specifically focused on how rates impact consumers' ability to borrow and save. He also has authored a wee

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Comments

  • Ralph Smith

    August 21, 2007

    The extraordinary thing here is that these guys paid through the nose for Greenpoint less than 12 months ago (North Fork Bank).

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