The parent of First Franklin Financial Corp. has confirmed it will shut down the subprime lender.
Merrill Lynch announced today it will discontinue originations at the San Jose, Calif.-based company and its NationPoint division. Approximately 650 people will be laid off as a result.
The potential closing was first reported last week by CNBC.
Merrill attributed the closing to the deterioration of the subprime lending market.
“Since July, we have reduced staffing at First Franklin by nearly 70 percent, but after evaluating a number of strategies, we believe it is appropriate to discontinue mortgage origination,” Merrill executive David Sobotka said in the statement.
The New York investment banking firm, which indicated it will take a $60 million charge in connection with the closing, said it will put First Franklin’s “profitable” servicing subsidiary, Home Loan Services, up for sale.
Originations at Merrill’s Global Wealth Management Group, Merrill Lynch Credit Corp. and its international mortgage businesses will not be impacted by today’s move, the announcement said.
Merrill acquired First Franklin from National City Corp. for $1.3 billion on Dec. 30, 2006 — just as the mortgage meltdown began. Merrill had a net increase of 4,100 in full-time staff mainly due to First Franklin’s acquisition.
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First Franklin Winding Down
Subprime lender First Franklin Financial Corp. will wind down operations, insiders are saying.
