Capital One slashes jobs, mortgage industry swoons

By Dan Wilchins

NEW YORK (Reuters) - The U.S. mortgage industry took another battering on Monday, as Capital One Financial Corp said it will shut a lending unit it bought less than a year ago, while two mortgage companies took steps to bolster liquidity as losses piled up.

Capital One, best known as a credit card issuer, said it will cut 1,900 jobs and take $860 million in charges as it closes its GreenPoint Mortgage unit, which it acquired last December when it paid $13.2 billion for North Fork Bancorp Inc.

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.

"GreenPoint has run into unforeseen challenges that are beyond its control," Capital One Chief Executive Richard Fairbank said in a memo to employees, adding the closure "is the function of an unprecedented set of market circumstances."

GreenPoint has specialized in "Alt-A" mortgages, which often go to people who do not qualify for "prime" mortgages or cannot fully document income or assets.

Capital One shares closed down 3 percent at $66.72 on the New York Stock Exchange. They fell an additional 2.4 percent to $65.08 in extended trading after Capital One's announcement.

THORNBURG SELLS ASSETS

Separately, home loan provider Thornburg Mortgage Inc said it sold $20.5 billion of mortgage assets and reduced short-term borrowings by a like amount to reduce the risk of its losing access to short-term credit markets.

The sale amounted to more than 35 percent of its assets as of June 30. Thornburg estimated the net value of its assets, or book value, fell 13 percent to $12.40 per share last week alone.

Its stock closed down $1.54, or 10.2 percent, at $13.50, on the NYSE.

Meanwhile, mortgage investor Luminent Mortgage Capital Inc

said it would sell a 51 percent stake at a deep discount to Arco Capital Corp, a San Juan, Puerto Rico-based holding company, to shore up its finances.

With U.S. home values weakening and mortgage defaults rising, investors have balked at buying home loans in any form, and mortgage bonds have broadly dropped relative to Treasuries. That has left many lenders starved for cash or business.

Countrywide Financial Corp took out advertisements in many newspapers on Monday seeking to reassure customers their bank deposits were safe.