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Tumult continues for mortgage companies

Countrywide, Capital One the latest victims.

By Times staff and wires
Published August 21, 2007


Countrywide Financial Corp., the nation's largest mortgage lender, sought to reassure customers Monday that the problems dogging its mortgage operations were not affecting its banking unit.

The assurance came amid a report that Countrywide has started laying off an undisclosed number of employees as it tries to ride out the credit crunch that has rocked the home loan industry.

At the same time Monday, Capital One Financial Corp. said it will cut 1,900 jobs and shutter its wholesale mortgage banking business.

Capital One said it will shut down GreenPoint Mortgage and eliminate most of the jobs by the end of year. The McLean, Va.-based company will close 31 GreenPoint locations in 19 states and "cease residential mortgage origination" effective immediately but said it will honor commitments to customers with locked rates who have loans already in the pipeline.

"Over the past few months, we have experienced an unprecedented disruption in the secondary mortgage markets," Capital One Chairman and Chief Executive Officer Richard D. Fairbank wrote in an internal memo to employees. "I made the decision to wind down the business with a heavy heart."

Employees at Countrywide's offices in the Tampa Bay area funneled calls to its California headquarters. The lender said the layoffs would occur in its Full Spectrum Lending division, which runs an office in Tampa's Westshore and serves borrowers with less-than-top-notch credit.

As one of the epicenters of the housing boom, and the subsequent slump, the Tampa Bay area has suffered from a rash of loan officer layoffs for much of this year.

First Magnus Financial Corp. officially ceased operations last week, taking an undisclosed number of local jobs with it.

The Tampa branch of H&R Block Mortgage Corp. laid off 141 in June, and on Aug. 10 HomeBanc Mortgage Corp. slashed another 59 jobs.

Capital One's closing of GreenPoint Mortgage Funding, with operations in Westshore, appeared to strike unexpectedly. As late as last week, GreenPoint was prospecting for a new supervisor at its Tampa office.

GreenPoint, based in Novato, Calif., specializes in no-documentation and Alt-A mortgage loans for borrowers with slightly better credit than subprime borrowers.

Countrywide, based in Calabasas, Calif., ran full-page ads on Monday in U.S. newspapers, including the Los Angeles Times and Detroit Free Press, in which it asserted "the future is bright" at Countrywide Bank FSB.

The ads noted the bank has more than $100-billion in assets, investment-grade ratings from three major credit agencies, and that the credit woes rocking its mortgage lending business don't affect federally insured deposits at its 105 financial centers around the nation.

It's a message Countrywide has tried to get across since last week, when a Wall Street analyst suggested the company could end up in bankruptcy if the liquidity crunch sparked by rising mortgage defaults worsens.

Countrywide said last Thursday it had borrowed $11.5-billion so it could keep making home loans.

Countrywide's shares fell $1.62, or more than 7 percent, to $19.81 Monday after rising 13 percent on Friday.

Staff Writer Jim Thorner contributed to this report.

Some good news

The Federal Home Loan Bank system has increased low-cost lending to financial institutions in an effort to bolster credit stability. As the housing crisis worsens and the Federal Reserve has swooped into the market to ensure liquidity, the 12 regional banks are making more cash available to banks and thrifts that make mortgage loans. Created by Congress during the Depression, the self-funded home loan bank system has some 8,100 members around the country: banks, savings and loans, and credit unions, predominantly small community lenders. Eight of every 10 U.S. financial institution belongs to the home loan bank system.

[Last modified August 20, 2007, 23:15:14]

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