Capital One cuts jobs and shuts retail mortgage services off
Posted on August 20, 2007
Filed Under Subprime Mortgage |
Reuters ran the headline: Capital One slashes jobs, mortgage industry swoons. It is almost enough to upset the faint of heart. After all, we are told that there is a mortgage industry meltdown - or at least a subprime mortgage industry meltdown.
A “correction” would be a better term.
Capital One is a lending provider whose target customer base is borrowers with less-than-stellar credit whom can be charged near-stellar interest rates.
Last year they acquired GreenPoint so that they could enter the mortgage industry to serve the same customer base - the subprime mortgage market that is.
An excerpt from the article reads:
McLean, Virginia-based Capital One plans to close GreenPoint’s headquarters in Novato, California as well as 31 offices in 19 states, and will stop offering mortgages through brokers.
It also cut its 2007 profit forecast to $5.00 per share from $7.15.
Do you see the word I underlined in the last sentence? Good. So, we can all see that the world is not coming to an end - nor shall Capital One’s loss of GreenPoint or the demise of any other subprime lender cause a market implosion. In reality, lenders and subprime lenders come and go all the time. There will be more someday when they are needed.
When Wells Fargo Home Mortgage closed down their subprime unit last year, it barely made the news, only to be buried in the back. That is because the media could not have created a furor over it at the time. Wells Fargo was not even ahead of the curve, but they were among those who caught on a little earlier in the game that the subprime market had peaked and was on its way down. Others decided to continue to milk it for all it was worth and hang on for the ride, at the same time hoping that the exit of other players might free up the room they needed.
(A side note: It does not even sound like GreenPoint is going out of business; they are just closing their borrower-facing sales operations to deal strictly in the secondary markets. They can still be profitable. See my article on this site called “What Are Mortgage Claims”).
For Capital One and GreenPoint, easy come, easy go. While I am having to work hard to find sympathy for many of these mortgage companies, let the reader understand that I do have concern and compassion for their employees and all those affected. One interesting facet of the mortgage industry that I have observed is this: Employees at the line level and lower management see themselves as mortgage professionals, whereas the mortgage companies (most of the big ones anyway) consider themselves to be “financial institutions”. Their focus is on the bottom line as required by the shareholders. Having worked in morgage companies’s corporate offices and having worked with lots of people who have been around the block with 6 to 12 companies, I have learned a little. And I have yet to hear of a mortgage company that lists being a “good and fair place to work” as one of their stated goals. This point I make only to offer a little insight as to why I might have sympathy for the individual but not the organization.
There is still more market correcting to come, and more companies to close their doors. Don’t worry though; balance will be found and growth will resume.
And if you are a borrower looking to finance or refinance, don’t despair. There are still plenty of reputable lenders who can probably help you. While it can be difficult sometimes to get someone to return your calls, LoanQuotes can help. Just fill out one simple form at LoanQuotes.com and let lenders get in touch with you. It’s free, and no SSN is required.
Oh, and one final thought regarding this whole cleansing of the subprime market: It does not affect any conventional loan you might already have. The main affect on the borrower is the ability to get a loan. Some lenders are already eliminating their offerings for undocumented income. So, you might have to go back and dig up two years’ worth of bank statements, pay stubs, and income tax returns. And by the way, if you have an interest-only or a variable rate loan, my recommendation would be to look into refinancing as soon as possible.
All the Best!
Stephen Dunbar
Disclaimer: LoanQuotes.com does not offer financial advise. Be sure to work with a qualified lending or financial professional in your transactions and decision making.
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