Greenpoint Mortgage Closed

August 20, 2007 Comments Off

Greenpoint Mortgage was shut down today by parent Capital One Financial Corp., who said weak demand for residential home loans forced the company to shut the ailing mortgage lender.

Capital One announced that it would cease loan origination operations at Greenpoint Mortgage immediately, and according to initial reports, cut roughly 1,900 jobs.

Loans that are already in the pipeline and locked will continue to be processed and should ultimately fund as scheduled.

The news followed similar statements made by the VP of investor relations for Capital One last week, who sparked employee concerns that the company was gearing up to close Greenpoint Mortgage.

Greenpoint Mortgage headquarters in Novato, California will be closed, along with 31 other branches in 19 states throughout the United States.

Greenpoint Mortgage specialized in Alt-A loans, offering programs for borrowers with credit scores down to 620, as well as option-arms, second mortgages, jumbo loans, and other high-risk products.

But earlier this year Greenpoint narrowed their product offerings significantly, effectively sinking loan volume and forcing the closure of 13 branches and 440 layoffs.

Capital One picked up the wholesale lender in their $13.2 billion North Fork Bancorp purchase last December, with high hopes that Greenpoint would be a solid performer.

Unfortunately, the market turned at just the wrong time, quickly turning the lender’s profits into losses.

Capital One had no intention of keeping mortgage loan balance sheets, and after winding up with more than $600 million in second mortgages on the books earlier this year, the company ultimately made the decision to shut the losing unit.

I received several e-mails from Greenpoint Mortgage employees this week who were concerned about their future at the company.

They mentioned that emergency meetings were held after the comments by their VP of investor relations last week, and that business was very slow, to the point where they felt it wouldn’t go on.

And it seems their worries were well-founded, as yet another lender closes its doors.

Greenpoint was the nation’s seventh largest originator of Alt-A mortgages.

The shutdown will cost Capital One about $860 million, or $2.15 per share, cutting its 2007 earnings forecast to $5 a share from $7.15.

Capital One stock dropped $2.03, or 2.95% to $66.72 in late trading, and an additional 22 cents in after-hours trading on the news.

Update: According to an internal Greenpoint e-mail, the commercial lending division is still open.

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