Just a week ago Capital One did the right thing by changing its policy about reporting true credit limits to the agencies that calculate credit scores. Hot on the heels of this positive change is another change that could be a good change for the company. Cap One is eliminating its GreenPoint mortgage company, which specializes in no-documentation and Alt-A loans — mortgages generally sold to people who probably shouldn’t qualify for borrowing.
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 McLean, Va.-based company will close 31 GreenPoint locations in 19 states and “cease residential mortgage origination” effective immediately but said it will honor commitments to customers with locked rates who have loans already in the pipeline.
“Over the past few months, we have experienced an unprecedented disruption in the secondary mortgage markets,” Capital One Chairman and Chief Executive Officer Richard D. Fairbank wrote in an internal memo to employees. “I made the decision to wind down the business with a heavy heart.”
This isn’t about improving the company’s image by eliminating disrespected business, it’s a liquidity issue. These sub-prime loans are turning out to be not necessarily a bigger risk than expected, but the money is not coming back to the company. Regardless of whether it looks good to the media, Capital One is getting out of the business because it’s no longer the money-maker it was at the beginning.
Thanks to Kai who forwarded me the Associated Press article.
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