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Capital One Closing Mortgage Unit

  Real Estate  -   POSTED: 2007/08/20 17:39

Capital One Financial Corp. said Monday it will cut 1,900 jobs and shutter its wholesale mortgage banking business, a move that comes as lenders continue to struggle in the nation's housing and mortgage markets.

Capital One said it will shut down GreenPoint Mortgage and eliminate most of the jobs by the end of year. The company will "cease residential mortgage origination" effective immediately and close GreenPoint's Novato, Calif., headquarters and 31 locations in 19 states.

The company said it will honor commitments to customers with locked rates who have loans already in the pipeline.

"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, chief financial officer of the McLean, Va.-based company.

The decision to close GreenPoint will hit the company with an $860 million charge, or $2.15 per share, the vast majority of which will come in 2007. Capital One lowered its 2007 earnings guidance by 14 percent to $5 per share.

Analysts polled by Thomson Financial expected earnings of $7.05 per share. Analysts estimates typically exclude one-time charges.

Capital One made the announcement after markets closed Monday. Its shares fell $2.03 to close at $66.72, then fell another $1.62 in after-hours trading.

Capital One said its other business lines remain solid and in line with expectations.

"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," Perlin said.


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