Lone Star Buys CIT's Servicing
Lone Star Funds - which already owns one of the nation's largest surviving subprime firms - has agreed to buy the nonprime lending division of CIT Group, including its servicing platform.
Lone Star will pay $1.5 billion in cash for the business and assume $4.4 billion in debt.
Among subprime servicers, CIT Group Consumer Finance of Livingston, N.J., ranks 20th, according to figures compiled by this publication and the Quarterly Data Report. At the end of March CIT serviced $8.7 billion in residential subprime loans.
By purchasing CIT's subprime division, Lone Star acquires a servicing platform. Lone Star's other subprime affiliate, Accredited Home Lenders of San Diego, does not have much in the way of servicing.
CIT Group Consumer Finance ranked second among all subprime lenders in the first quarter originating $652 million in loans. Accredited Home Lenders ranked eighth with $127 million.
The subprime lending sector is in the throes of a severe correction, the likes that has never been seen. All subprime firms funded just $4 billion in mortgages in the first quarter compared to $89 billion in the first quarter of 2007, a decline of 96%.
Consumers owe roughly $990 billion on their subprime loans, according to Mortgage Servicing News and the QDR.
Meanwhile, in a separate transaction CIT agreed to sell a $470 million manufactured housing portfolio to Vanderbilt Mortgage and Finance for $300 million.
CIT said the two sales will bring in $1.8 billion in cash. Even so, it will book a $2.5 billion (pretax) loss in the second quarter. (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/