Confirming rumors that had spread earlier today regarding National City Corporation, an ABC News story from a local affiliate in Denver reports that the bank has shuttered its wholesale lending division. From the story:
In a letter to customers, National City Mortgage said, "While this decision was not taken lightly, this business line no longer fits with National City's future mortgage business strategy. National City Mortgage will continue to offer a comprehensive suite of mortgage products that will satisfy most consumers' needs. We will continue to originate loans through our Retail Lending channel via our retail mortgage branches as well as through National City's retail bank branches. " As to why National City Mortgage is getting out of the [wholesale] lending business, the company's letter explained, "As you know, rapidly changing conditions in mortgage markets have resulted in significant challenges in the industry. Like many mortgage lenders, National City has taken a number of aggressive steps to manage through the unprecedented disruption in the mortgage, housing and credit markets. However, continued volatility, coupled with a forecasted ongoing cyclical downturn in origination activity, requires that we take additional action."
The Ohio-based bank has been under earnings pressure from its former First Franklin Mortgage and Home Equity lending segments. National City sold First Franklin, a subprime lending operation, to Merrill Lynch in January in a deal valued at $1.3 billion; in August, the company said it would merge its Home Equity lending business with National City Mortgage, the bank's wholesale lending arm. The revamped wholesale mortgage unit saw 1,300 jobs cut in September, prior to the announcement today of its closing. Wholesale lending has been under pressure most of 2007 in the mortgage banking industry, with other large banks such as Bank of America announcing a decision in October to shutter its wholesale mortgage operation. Disclosure: The author owned no positions in NCC when this post was published.