The US mortgage industry took another battering yesterday, as Capital One Financial Corp said it would shut a lending business it bought less than a year ago. Two other mortgage companies took steps to boost liquidity as losses piled up.
Capital One, best known as a credit card issuer, said it would cut 1,900 jobs and take $860m in charges as it closed its GreenPoint Mortgage division, which it acquired last December.
'GreenPoint has run into unforeseen challenges that are beyond its control,' Capital One chief executive Richard Fairbank said in a memo to employees. GreenPoint has specialised in 'Alt-A' mortgages, which often go to people who do not qualify for traditional mortgages or cannot fully document their income or assets.
Separately, home loan provider Thornburg said it sold $20.5 billion of mortgage assets and reduced short-term borrowings by the same amount to reduce the risk of its losing access to short-term credit markets. The sale amounted to more than 35% of its assets as of June 30.
Meanwhile, mortgage investor Luminent Mortgage Capital Inc said it would sell a 51% stake at a deep discount to Arco Capital Corp, a Puerto Rico-based holding company, to shore up its finances.
With US home values weakening and mortgage defaults rising, investors have stopped buying home loans in any form, and mortgage bonds have dropped. That has left many lenders starved for cash or business.
The biggest US mortgage lender Countrywide also took out advertisements in many newspapers on Monday seeking to reassure customers their bank deposits were safe.
