Capital One Seeking 'Combat' Servicers

Capital One Financial Corp., McLean, VA, is seeking out "combat" servicers to aid the bank in dealing with its growing base of problem residential loans, according to three specialty firms interviewed by National Mortgage News.

One of the companies contacted said his firm's name was on a list provided to Capital One by PricewaterhouseCoopers, an accounting and advisory firm. "They're looking for servicers that do nothing but handle 'hard' loans," he said.

He and others familiar with Capital One's solicitation did not want to be identified by name. The bank issued a statement noting, "We regularly explore our strategic options as part of our normal course of business. In this case, we have reached out to a number of mortgage servicers requesting information about their capabilities." The company added that it has built what it calls a "strong internal servicing platform and we continue to explore both internal and external methods to increase our capacity."

But one subservicer said Capital One, in some cases, "is not happy with the people servicing their paper." He called the bank's outreach a "pilot program" where "it will give certain subservicers $100 million worth of product to work on."

Capital One is well known nationally because of its huge share of the credit card market, a business it promotes heavily through national television advertising. However, it also has an extensive reach into the mortgage business thanks to recent purchases of Chevy Chase Bank and its mortgage affiliate, B.F. Saul Mortgage. In 2006 it bought North Fork Bancorp of Long Island, which owned a large alt-A lender/servicer, GreenPoint Funding of California.

But these "legacy" mortgage businesses carry certain challenges: alt-A delinquencies are rising rapidly, and Chevy Chase/B.F. Saul was a large player in the payment option ARM market, another problematic loan type.

According to the bank's fourth-quarter earnings statement, charge-offs and delinquencies are rising on both its commercial and residential holdings. At yearend, 2.24% of its home mortgages were delinquent, almost double the rate of a year earlier.

Roughly, 3.25% of its commercial real estate and multifamily holdings are late, compared to 1.21% in the fourth quarter of 2008.

Capital One has stopped reporting and breaking out servicing and origination figures for Chevy Chase/B.F. Saul. According to an estimate made by the Quarterly Data Report, that division services roughly $21 billion in home mortgages.

Prior to its sale to Capital One, Chevy Chase was privately held.