Bank Faces 3Q Mortgage Loss
GRAND RAPIDS — National City Corp. previously projected that losses related to its mortgage banking line of business would be in the $130 million to $160 million range in the third quarter. In its mid-quarter financial report filed with the Securities and Exchange Commission last week, the company confirmed that losses would likely be on the high end, though the actual amount of the loss will not be calculable until after the close of the third quarter.
The bank had notified analysts, investors and the SEC in early September that it was scaling back its mortgage business and laying off 1,300 people in its mortgage banking line of business. At that time, the company suspended broker-sourced originations of home equity loans and merged its National Home Equity unit into National City Mortgage, resulting in the elimination of approximately 500 positions. Severance and other charges totaling up to $10 million will be recorded in the third quarter as a result. The bank also cut back on issuing home loans that cannot be sold to government-backed agencies, such as Freddie Mac and Fannie Mae. That move eliminated approximately 800 positions in the mortgage unit and related support functions. The company expects to record severance and other one-time charges of $18 million to $25 million in September in connection with this action.
Everyone is downsizing right now because the mortgage business is slowing down, said National City Regional President Sean Welsh. As to the job losses, there will be minimal to no impact on Michigan, he said. Welsh sees the whole thing as a “non-event” for this market.
“None of the $160 million was related to mortgage loan losses. It’s an estimate of expected loan loss in the mortgage line of business, and there are several components to that, one of which is severance costs as we downsize,” Welsh explained. “We’re also processing through market to market for the write-downs of loans that we hold for sale.”