Capital One Shuts Down
GreenPoint Mortgage Unit
Plans to Close 31 Locations
And Eliminate 1,900 Jobs
By VALERIE BAUERLEIN
August 20, 2007 4:42 p.m.
Capital One Financial Corp. plans to shut down its struggling GreenPoint mortgage unit, becoming the latest casualty in the mortgage meltdown.
Capital One bought GreenPoint in last year's $13.2 billion purchase of North Fork Bancorp, of Melville, N.Y. North Fork had earlier paid $6.3 billion for GreenPoint Financial Corp., then a large N.Y. savings-and-loan specializing in mortgages.
The unit specialized in so-called nonconforming loans, which do not meet the standards set by Fannie Mae and Freddie Mac, the government-sponsored providers of mortgage funds. GreenPoint specialized in "jumbo" loans above the $417,000 limit and Alt-A loans to home buyers who do not fully document their income or assets.
Citing great difficulty selling loans to the secondary market, Capital One officials said the bank will closing GreenPoint's 31 locations and eliminating 1,900 jobs immediately. The credit-card giant said the subsidiary would not make any more new mortgages but will fund those in the pipeline with locked-in rates.
In a statement, Capital One, McLean, Va., said it will take an after-tax charge this year of $860 million, or $2.15 per share. The company is revising downward its 2007 earnings guidance to approximately $5 per share.
Capital One made its name in the direct marketing of no-fee credit cards but has been on a two-year quest to become a full-service bank.
Capital One was optimistic when it acquired GreenPoint that the mortgage unit's national footprint and infrastructure would give it immediate scale and a growing earnings stream. But the housing market slowed shortly after the purchase and investors cooled on nonconforming mortgages.
Capital One lost $9.69 million on its mortgage unit in the first half. The company said recently that it was slowing the origination of new mortgages to drain its pipeline but was still having trouble selling packaged mortgages and could not easily hold them.
Chairman and Chief Executive Officer Richard D. Fairbank said in an internal memo Monday to employees that the decision was "the function of an unprecedented set of market circumstances."
Write to Valerie Bauerlein at firstname.lastname@example.org