Capital One Financial Corp. said Monday it’s shutting down its wholesale mortgage banking unit, GreenPoint Mortgage, but will meet contractual obligations to customers with loan commitments in the pipeline with rates locked.

Capital One is closing GreenPoint’s California-based headquarters and 31 locations across 19 states, eliminating 1,900 positions, most by the end of the year.

“The reductions in demand and pricing in the secondary mortgage markets make it difficult to operate our wholesale mortgage banking business profitably,” said Capital One Chief Financial Officer Gary Perlin, in a statement. Perlin said Capital One’s other businesses are “supported by ample liquidity and funding,” including deposits and a stockpile of subordinated credit card funding.

Capital One, which acquired GreenPoint Mortgage in December 2006 as part of its acquisition of North Fork Bancorporation, said it will take an $860 million after-tax charge to close GreenPoint, and is revising its 2007 earnings guidance from $7.15 per share to $5 per share.

GreenPoint’s focus was prime nonconforming and Alt-A loans, and Capital One said it intends to continue originating and selling mortgage loans through Capital One Home Loans and 725 Capital One N.A. bank branches. Direct interactions with customers, rather than brokers, “provides greater control of the underwriting and origination process,” the company said in a statement.

Capital One will retain a $12.5 billion mortgage portfolio, most of which was held by Hibernia and North Fork Banks when Capital One acquired them in 2005 and 2006.

The portfolio also includes approximately $680 million of second-lien mortgages originated by GreenPoint Mortgage in late 2006 and early 2007, and Capital One holds $2.6 billion in mortgages held for sale by GreenPoint.

In other news Monday:

Luminent Mortgage Capital Inc. said it’s granting Arco Capital Corp. Ltd. the right to buy up to 51 percent of the company for 18 cents per share.

Luminent, which said it has outstanding notices of default for unfunded outstanding margin calls totaling approximately $30.9 million, said Arco Capital will provide up to $60 million in capital and has arranged for the repurchase of about $65 million in mortgage security portfolios with Luminent.

Shares of Thornburg Mortgage Inc. fell 10 percent Monday after the jumbo lender announced it would post $930 million in losses on the sale of its mortgage-backed securities in the third quarter.

The rapid sale of $20.5 billion of AAA-rated mortgage-backed securities (MBS) at discounted prices should help Thornburg Mortgage — which stopped accepting loan applications last week — return to normal operations within the next two weeks, said President and Chief Operating Officer Larry Goldstone.

The sale trimmed the New Mexico-based lender’s mortgage asset portfolio to $36.4 billion, while reducing repurchase and paper borrowings from $32.9 billion at the end of June to $12.4 billion as of Aug. 17, the company said. The sale included most of the company’s lowest yielding and negative spread assets.

Thornburg Mortgage also terminated about $41.1 billion of interest-rate hedging instruments. Together, those actions should reduce the company’s exposure to margin calls on its short-term loans, Goldstone said

“We have now greatly reduced our exposure to continued widening of the spread between our mortgage assets and our hedging instruments and the associated margin calls against our collateralized borrowings and hedging instruments,” Goldstone said in a statement. “As a result, we believe we have nearly stabilized our liquidity situation, which we expect will allow us to begin to resume normal operations over the next two weeks as a leading residential mortgage portfolio lender” in jumbo and super-jumbo adjustable-rate mortgages.

Goldstone said Thornburg Mortgage hopes to reopen its loan lock desk in the next two weeks, and to “gradually begin locking loans for clients and accepting new jumbo ARM applications. The company also anticipates the gradual resumption of funding loans for its nationwide base of lending partners and their clients.”

The move could also increase the cost of borrowing for Thornburg Mortgage, with Fitch Ratings downgrading the company’s issuer default rating from BB to CCC.

Organized as a real estate investment trust (REIT), Thornburg Mortgage boosted loan originations by 21 percent in the second quarter over the year before, to $1.7 billion.

The company says its 60-day delinquent rate much lower than the national average at 23 percent — or 79 delinquent loans out of 38,000 on its books. But like many other lenders, Thornburg Mortgage has had trouble obtaining short-term funding in the commercial paper market to fund its loans.

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