CIT Group Ends Home Loans Operation

[Jul 15, 2008.]

The financier CIT Group, Inc of New York reported earlier today that it plans to sell off the entire part of its operations that deals with home loans. The company has decided to avoid the problematic home mortgage market, in favor of dealings constrained specifically to the finance sector.

To implement this plan, CIT Group has sold its entire home loans operation for a combined total of $1.5 billion plus $4.4 billion worth of money owed. As a further implementation of the plan to leave the mortgage market, CIT has sold all of its manufactured housing interests to Vanderbilt Mortgage and Finance, Inc. These assets were valued $470 million and sold to Vanderbilt for approximately $300 million, so the sale was a loss of $170 million for CIT. The full transfer of these assets will end at the beginning of 2009.

Jeffrey Peek, chief executive of CIT and the chairman of its board of directors, thinks the loss was worth it. "These sales complete our exit from all home lending businesses, removing the uncertainty surrounding this asset class," he explained earlier today. The sale "advances our strategic transformation into a company focused entirely on commercial finance," added Peek. CIT expects to lose about $2 billion during the second fiscal quarter of 2008 due to the absence of its home lending operation.

Presently, the CIT home loans operation contains about $9.3 billion in assets, and has close to 300 employees.

CIT has been trying to raise money and reduce areas of potential risk throughout this year. This sale represents just one more step in a long-term plan engineered by CIT with the help of financial counsel from JPMorgan Chase & Co. and legal help from Wachtell, Lipton, Rosen & Katz as well as McKee Nelson, LLP. Starting in April, CIT has sold $2 billion worth of assets and managed to obtain $1.6 billion worth of additional capital.