HSBC continues cutting U.S. mortgage business with $4.9B loan sale to Credit Suisse

HSBC Finance mortgage book was $117.7 billion in 2008, now it’s $2 billion

HSBC’s reduction of its U.S. mortgage business, which began way back in 2008, took another big step forward recently, as the company announced recently that its subsidiaries, HSBC Finance Corporation and HSBC Bank, sold $4.9 billion in mortgages to a subsidiary of Credit Suisse.

HSBC Finance is the company known as Household International, the subprime lender that HSBC purchased in 2003. In 2008, HSBC Finance ceased underwriting loans and HSBC began selling off its mortgage portfolio.

This latest sale brings HSBC Finance’s mortgage book to only $2 billion, down significantly from its 2008 level of $117.7 billion.

According to a spokesperson for HSBC, HSBC Finance’s current mortgage book is roughly 2% of where it stood in 2008.

This latest loan sale was conducted in two different transactions. First, on February 23, HSBC Finance closed on the sale of a $1.5 billion portfolio of mostly second-lien mortgages to DLJ Mortgage Capital, a subsidiary of Credit Suisse.

Then, on March 8, HSBC Finance closed on a separate sale of a $3.4 billion portfolio of mortgages to DLJ Mortgage Capital.

All total, the sales equal $4.9 billion in legacy mortgages heading to the Credit Suisse subsidiary.

The loan sales were originally disclosed in filings with the Securities and Exchange Commission. The filings stated that the loan sales are “part of the ongoing reduction of HSBC’s US consumer mortgage loan business and is in line with HSBC’s strategy to sell substantially all of HSBC Finance Corporation’s residential mortgage loans.”

According to a HSBC spokesperson, the sales are just the latest in HSBC Finance’s shift away from mortgages.

In 2016, HSBC Finance sold off approximately $10 billion in loans, and company expects to sell off “substantially all” of the remaining $2 billion in its mortgage book in multiple transactions in 2017.

In those filings, HSBC said that it plans to use the funds raised by the loan sales to “pay down long-term debt and for general corporate purposes.”

When contacted by HousingWire, a spokesperson for Credit Suisse said the bank will not be commenting on the loan sales.

As for HSBC, a spokesperson said the sales are “part of HSBC’s global strategy to redirect capital into businesses related to international banking and to reduce the overall risk of our assets globally, and thus to better serve our internationally minded customer base and drive higher returns for our shareholders.”

The HSBC spokesperson also noted that HSBC Bank, HSBC’s full service bank that offers mortgages, remains an important part of HSBC’s global growth strategy.

According HSBC’s annual report (found here), HSBC Bank’s mortgage business grew in 2016.

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