Barclays will shut down its U.S. wholesale mortgage origination unit just two years after having made a major effort to get into the business.
Peter Truell, a spokesman for the London company, confirmed Tuesday that it plans to close EquiFirst Corp.
"Due to market conditions, Barclays Capital has chosen to exit its residential mortgage origination business, EquiFirst," Truell said. "Barclays Capital remains committed to its other mortgage businesses in the U.S." He would not comment further.
A source familiar with the plan said the unit should be closed by the second quarter. Activity has essentially stopped, and what remains is a "team that is winding it down," said the source, who asked not to be identified.
The source would not discuss the size of the business, except to say its operations were "a small item and not material" to Barclays' overall operations.
Barclays bought EquiFirst in April 2007 from Regions Financial Corp. to boost its wholesale mortgage operations. However, the housing market had already started to show cracks soon after the deal was announced in January 2007, causing Regions to slash its price for the unit by two-thirds, to $76 million.
In an interview in August, Robert E. Diamond Jr., Barclays' president, was reluctant to show support for the beleaguered operation. He vowed to stick with the business for the rest of that year and take a "fresh look" this year.
"There has been an awful lot of restructuring" in originations, he said at the time, as Barclays shifted to bank-led and agency loans. "The value has significantly gone down."