HSBC Holdings PLC is contemplating selling its "A" paper mortgage banking affiliate in Depew, N.Y., a sale that—if it comes off—would only include its servicing operation, which ranks 17th nationwide.
A company spokesman clarified that HSBC Mortgage has no origination branches whatsoever and that all of its loans are sourced through the bank's 475 branches, most of which are concentrated on the East Coast with some out West.
"We could keep the thing and maintain the status quo," said the spokesman. The unit, which services $66 billion of mostly "A" paper loans, employs 1,500 full-timers.
HSBC is conducting an internal review of the mortgage division and hopes to make a decision by the fall. "Our review may not result in any action," he stressed.
Among funders, HSBC Mortgage ranks 20th with a quarterly run-rate of about $1.4 billion, according to figures compiled by National Mortgage News and the Quarterly Data Report.
However, last week the bank said it would stop disclosing its origination numbers publicly without saying why.
As for which firms might buy HSBC Mortgage that remains unclear. Even though origination profit margins remain strong, the secondary market for both servicing portfolios and platforms remain weak, thanks to the mortgage meltdown, uncertainty facing Fannie Mae and Freddie Mac, and such issues as "reps and warranties."
HSBC Mortgage has its roots in an upstate depository called Marine Midland Bank. The British-based HSBC bought the New York bank in the early 1980s, gaining a foothold into the U.S. market.
Even though HSBC Mortgage performed fairly well for many years, the parent company was burned by its foray into subprime lending. In 2003 the British bank paid $14 billion to purchase Household Finance, a subprime and consumer finance lender/servicer based in Illinois.
The purchase proved disastrous for HSBC. Once the housing and subprime bubble burst in 2007 HSBC suffered billions of dollars in losses and last year closed all of Household's consumer branches.
The spokesman said HSBC owns and services roughly $70 billion in "legacy" loans that came from Household. "That business is in runoff," he said. "There is no new business there."
Three years after HSBC bought Household, its storied chairman, Sir John Bond, retired.
Two years ago HSBC exited the warehouse lending business as well.
