Capital One Shuts Down
GreenPoint Mortgage Unit

Capital One Financial Corp. plans to shut down its struggling GreenPoint mortgage unit, becoming the latest casualty in the mortgage meltdown.

Capital One bought GreenPoint in last year’s $13.2
billion purchase of North Fork Bancorp, of Melville, N.Y. North Fork
had earlier paid $6.3 billion for GreenPoint Financial Corp., then a
large N.Y. savings-and-loan specializing in mortgages.

The unit specialized in so-called nonconforming loans, which do not meet the standards set by Fannie Mae and Freddie Mac,
the government-sponsored providers of mortgage funds. GreenPoint
specialized in “jumbo” loans above the $417,000 limit and Alt-A loans
to home buyers who do not fully document their income or assets.

Citing great difficulty selling loans to the secondary
market, Capital One officials said the bank will closing GreenPoint’s
31 locations and eliminating 1,900 jobs immediately. The credit-card
giant said the subsidiary would not make any more new mortgages
but will fund those in the pipeline with locked-in rates.

In a statement, Capital One, McLean, Va., said it will
take an after-tax charge this year of $860 million, or $2.15 per share.
The company is revising downward  its 2007 earnings guidance to
approximately $5 per share.

Capital One made its name in the direct marketing of
no-fee credit cards but has been on a two-year quest to become a
full-service bank.

Capital One was optimistic when it acquired GreenPoint
that the mortgage unit’s national footprint and infrastructure would
give it immediate scale and a growing earnings stream. But the housing
market slowed shortly after the purchase and investors cooled on
nonconforming mortgages.

Capital One lost $9.69 million on its mortgage unit in
the first half. The company said recently that it was slowing the
origination of new mortgages to drain its pipeline but was still having
trouble selling packaged mortgages and could not easily hold them.

Chairman and Chief Executive Officer Richard D.
Fairbank said in an internal memo Monday to employees that the decision
was “the function of an unprecedented set of market circumstances.”

http://online.wsj.com/article/SB118764159728403271.html?mod=hps_us_whats_news

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