Capital One Slashes 1,900 Jobs
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 through a credit crunch in the nation's housing market.
Capital One said it will shut down GreenPoint Mortgage and eliminate most of the jobs by the end of year. The company will close 31 GreenPoint locations in 19 states and "cease residential mortgage origination" effective immediately. The company 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 expect earnings of $7.05 per share. Analysts estimates typically exclude one-time charges. Capital One shares fell $2.03 to close at $66.72.
Capital One said its other business lines remain solid and in line with expectations, adding that it will continue to sell home loans through Capital One Home Loans and its bank branches.
"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.
GreenPoint, based in Novato, Calif., specializes in no-documentation and "Alternative A" mortgage loans — geared for those with slightly better credit than subprime borrowers.
As the nation's housing market has cooled, mortgage lending industry has struggled with a dramatic rise in mortgage defaults and foreclosures. Many homebuyers have been forced into default or foreclosure because they haven't been able to sell their homes or end up owing more than their home is worth.