HSBC to close Sub Prime Lending Unit, Fire 750
Reuters has the latest on the HSBC close down:
HSBC Holdings Plc (HSBA.L: Quote, Profile , Research), Europe’s biggest bank, said on Friday that it would close its U.S. subprime mortgage unit, cutting 750 jobs and taking an $880 million writedown, because the business is no longer sustainable.
For HSBC, which is under pressure from activist investors to shake up its corporate governance, it was the latest blow from the meltdown in the U.S. market for loans to home buyers with poor credit histories.
Decision One has restructured operations in the past year as defaults on risky subprime loans to people with weak credit have escalated. The unit centralized loan processing and underwriting and reduced the number of operating centers to two from 17.
Decision One relies on a network of independent mortgage brokers to find borrowers and to submit loan applications, a model that has been curtailed or discontinued by other lenders burned by lax underwriting standards and outright fraud.
An $880 MILLION DOLLAR writedown? That is a huge amount of money for a lender. Imagine how they have to pay off mortgage debt from foreclosures in order to reach such a high number. The losses are amazing.
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