More fallout from the mortgage mess. Only a month after CIT said it would sell its mortgage origination business, yesterday it announced that it was simply shuttering it instead.
“The move comes as dozens of other financial institutions flee the free-falling business of making home loans to consumers with subprime credit. Last week, Lehman Brothers closed its subprime mortgage unit, and Capital One shut down the wholesale unit of GreenPoint Mortgage,” Crain’s New York reports. Bear Stearns had shut down two of its mortgage units the week prior to last. HSBC, one the the biggest providers of subprime mortgages, has shut down some operations but is far from exiting the mortgage origination business.
CIT is eliminating 550 jobs across 25 offices by shuttering the operation.
CIT first reported problems in its mortgage business, which caters primarily to subprime borrowers, six weeks ago. At that point the Manhattan-based firm wrote down the value of its roughly $10 billion portfolio by $765 million, resulting in an unexpected second quarter loss of $135 million. Its stock plummeted, as investors feared further writedowns to come. On Tuesday the shares lost another 4%, sinking to $35.85 by late morning.
So far the mass layoffs haven’t yet hit Wall Street. But many fear that just as the problems in the subprime mortgage market spread to other credit markets, the layoffs may follow as well.
CIT shutters lending business, takes charge [Crain's]