Downey Financial Corp.'s thrift closed its wholesale lending department Thursday and said it is "scaling back" its retail channel, changes that will eliminate 200 jobs, or about 8% of the Newport Beach, Calif., company's work force.
Charles R. Rinehart, who was named Downey's chief executive last month, said in a press release Thursday that the cuts are "a recognition of the company's capital requirements and the changed dynamics in our industry, particularly the decreased ability of borrowers to qualify for loans." In September the Office of Thrift Supervision issued a cease-and-desist order instructing Downey to raise capital this year.
Many other mortgage lenders have shuttered wholesale channels in the last year and a half, including HSBC Holdings PLC, Capital One Financial Corp., and Bank of America Corp. (though B of A subsequently bought a wholesaler with Countrywide Financial Corp.).
Downey's retail channel will be downsized "to better reflect the industrywide contraction in retail lending," Mr. Rinehart said.
The company was a big originator of option adjustable-rate mortgages during the California housing boom. It lost $219 million in the second quarter, the company's fourth consecutive quarterly loss, and is scheduled to report third-quarter results sometime next week.
