Capital One Unloads$17 Billion Billions in Mortgages -- WSJ
May 09 2018 - 3:02AM
Dow Jones News
By Austen Hufford and Justin Baer
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (May 9, 2018).
Capital One Financial Corp. is selling about $17 billion of
mortgages as part of its exit from the single-family home-lending
business.
The move comes after Capital One said in November that it would
stop originating residential-mortgage loans and home-equity lines
of credit, citing the complex and competitive nature of the
business and the interest-rate environment.
Capital One said on Tuesday it reached a deal to sell the first-
and second-lien mortgages to DLJ Mortgage Capital Inc., a
subsidiary of Credit Suisse Group AG.
Credit Suisse then agreed to sell most of the mortgages to
Pacific Investment Management Co., according to people familiar
with the matter. Pimco is one of the world's largest managers of
bonds and other fixed-income securities.
Terms of the transactions weren't disclosed.
Interest rates on typical single-family mortgages have remained
well below those seen before the financial crisis. The 30-year
fixed-rate mortgage averaged 4.55% last week, according to data
from Freddie Mac, marking its second consecutive week above the
4.5% mark. The last time average fixed mortgage rates were above
4.5% in consecutive weeks was January 2014. Rates averaged above 6%
from 2006 to 2008.
"We determined that our originations business did not have
sufficient scale to be competitive in a market where scale really
matters," Capital One Chief Executive Richard Fairbank said on a
call with analysts in January.
Capital One expects to complete the deal and record a gain on
the sale in the current quarter. The company had about $16.63
billion of total home loans on its books as of March 31.
"Strong market demand enabled us to negotiate and sign this
complex transaction more quickly than we thought possible," Capital
One financial chief R. Scott Blackley said Tuesday in prepared
remarks.
Capital One isn't alone in rethinking its home-lending strategy.
Last month, MB Financial Inc. said it would no longer originate
residential-mortgage loans outside its Chicago-area home market
because of high competition and low margins in the sector. The
Chicago-based bank said it would continue to hold
residential-mortgage loans on its balance sheet.
As a result of the sale, Capital One said it would resume
repurchasing shares of its common stock through June 30.
The shares of Capital One advanced $1.26, or 1.4%, to $90.18 on
Tuesday.
Write to Austen Hufford at austen.hufford@wsj.com and Justin
Baer at justin.baer@wsj.com
(END) Dow Jones Newswires
May 09, 2018 02:47 ET (06:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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