HSBC Finance said today that it will close its Decision One subprime wholesale lending unit, the latest in a string of mortgage lenders pulling back from wholesale and correspondent lending. The bank said it will place a greater emphasis on origination and servicing through its HFC and Beneficial retail branch channels. From the press statement:
"We are delivering the strategy put in place earlier this year to position HSBC Finance's mortgage business for long-term success," said Brendan McDonagh, Chief Executive Officer. "Today's market requires a strong and flexible business platform, and we will focus on our branch network as the primary point to provide our HSBC Finance customers with loans and mortgages." "This is a small part of our U.S. business," said Michael Geoghegan, Group Chief Executive, HSBC Holdings plc. "It's no longer sustainable and not the right place to allocate capital in the future. We said we would make tough decisions and we have done exactly that."
Of course, that wasn't how Decision One was characterized during the housing boom, where wholesale origination activity drove much of the spectacular growth in subprime lending. HSBC said the move will cost 750 employees their jobs, primarily in Fort Mill, S.C., Phoenix, Ariz., and Charlotte, N.C., and that it will incur an after-tax charge of $65 million surrounding the exit.