Capital One said today that it is shuttering GreenPoint Mortgage, its wholesale origination arm, citing "significant" profitability challenges -- costing more than 1,900 employees their jobs. The closure will hit the bottom line, too. The company said it will take a $860 million charge in 2007 related to the closure, and revised its EPS guidance downward more than 30 percent to $5.00 per share. From the press statement:
"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, Capital One's Chief Financial Officer. "Beyond that, 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."
GreenPoint focused on non-conforming and Alt-A originations, and Capital One said it will close the company's California-based headquarters as well as 31 locations nationwide, which employ 1,900 or so, by the end of this year. The company said the closure will not affect its retail operations via Capital One Home Loans, citing "greater control" of the origination process via its direct channel. Earlier, I'd shed light on the question if brokers are being blacklisted in the new mortgage market -- this would seem to provide further fuel for that debate.