At the KBW Inc. Large Cap Bank Conference in Kohler, Wisconsin last week Michael Rowen, VP of investor relations at Capital One Financial spoke to Wall Street analysts about a variety of banking topics, including the ongoing mortgage crisis and its effect on their business.
Though Rowen touched on several subjects, many analyst questions concerned the recently acquired Greenpoint Mortgage, which was part of the North Fork Bancorp deal last December.
Rowen responded to questions on Greenpoint and the troubles in the secondary market saying Capital One was never quite sure if they would make it long term.
He noted that the company was stuck with about $600 million in second mortgages and Cap One was never fond of holding stuff like that on its balance sheets.
One analyst asked Rowen if shutting down Greenpoint would be an option, as it seemed the acquisition wasn’t meeting expectations and was more of a liability than an asset.
Rowen replied that if the secondary market continued to be insolvent, such a scenario would be possible and that alternatives could be explored.
Unfortunately, the mortgage market woes are more than likely to continue, so the result could be the sale or closure of Greenpoint Mortgage as a means to pare losses sustained by the unit in the last six months, while eliminating the perceived risk the mortgage lender poses to Capital One in the future.
A reporter who covered the press conference published an article last Wednesday which stated “Capital One mulls Greenpoint sale” in the subtitle of the headline.
Word quickly spread about the article, and what was said by Rowen, forcing Greenpoint Mortgage to reassure employees that business would continue as usual.
But the comments were enough to rattle employees, leaving many to question their future with the company and in the mortgage business in general.
Greenpoint Mortgage originates and sells Alt-A mortgages, loans which have come under intense scrutiny in recent months, resulting in 13 closed branches and 440 layoffs at the company.
Greenpoint has had four owners in the past twelve years, and it’s unclear if a new suitor would be willing to step forward to rescue the ailing lender in the current market.
Update: Greenpoint Mortgage closed!