Capital One Is Exiting the Mortgage Business: Here’s What it Means for Borrowers

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Capital One announced Tuesday that it would shutter its profit-losing mortgage and home equity origination businesses.   
As a result, the banking and financial services company will cut about 900 mortgage-related jobs in three states, a Capital One spokesperson told MagnifyMoney via email.   
In addition to its mortgage loan business, the banking and financial services company offers a variety of products that includes credit cards, checking and savings accounts and auto loans.   
But the company has struggled to make its mortgage business as profitable as the competition. Capital One originated $901 million in home loans in the third quarter of 2017, but that wasn’t enough for the bank to make the list of top 40 mortgage providers, according to Inside Mortgage Finance, a trade publication.  
“Given the challenging rate environment in this space, we are structurally disadvantaged and we are not in a position to be both competitive and profitable,” the company’s spokesperson said.  
Ted Tozer, senior fellow at the Milken Institute (a nonprofit, nonpartisan think tank focused on global prosperity) and former president of Ginnie Mae, told MagnifyMoney that Capital One’s exit should not have a negative impact on the home lending business because it has not been an effective player since it entered the space some eight years ago.   
“It’s come to light that they don’t have a cost-effective operation because they really haven’t invested in technology,” Tozer said.  
In fact, he said, this will be good news for the industry because other financial institutions will then absorb Capital One’s customers in an increasingly competitive business.  
The competition in the home lending business has grown fiercer as interest rates rise, driving fewer homeowners to refinance, Tozer noted. The country is also still experiencing historically low homeownership rates.   
Nonbank financial institutions that have sprung up since the Great Recession are taking an increasingly big slice of the business. Legacy banks such as Capital One are losing customers to industry disruptors, like Quicken Loans, that have invested heavily in technology to streamline the lending process, experts say.  
“Everyone’s trying to compete for the fewer borrowers out there and you have to really have a cost-effective infrastructure to be able to compete in this kind of cut-throat environment we are going through right now,” Tozer said.   
“Capital One is hamstrung by old technology, whereas the new nonbanks are doing this 21st-century technology, and they are able to get the consumer a better experience for a cheaper price.”  
So how will the end of Capital One’s mortgage business actually affect consumers?
If you were hoping to get a Capital One mortgage …
You’re out of luck. Capital One is not going to take additional home loan applications effective immediately.   
If you have a Capital One mortgage or home equity loan already …
Not much will change for you. The bank will continue to service the loans in its portfolio. The company’s spokesperson told MagnifyMoney that consumers who have a loan in process or whose loan is being serviced by Capital One can continue to access their accounts the same way they’ve done so far – through digital means, by phone or by visiting a bank branch.  
If you are the middle of processing a Capital One mortgage application …  
The spokesperson said Capital One would close all open mortgage applications soon. If a loan cannot be closed promptly, the financial institution will refund any fees would-be borrowers have paid so that they can find another lender.  
Capital One will continue to provide specialized multifamily financing to the real estate development and investment community through Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA), according to to the company.  
Capital One will also continue lending activities for affordable housing supporting the low- and moderate-income markets.  
Experts suggest consumers reach out to their loan officer or customer service to receive an update on their loan if they have questions.    
The post Capital One Is Exiting the Mortgage Business: Here’s What it Means for Borrowers appeared first on MagnifyMoney .

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