The company also is selling its $470 million manufactured housing portfolio to Vanderbilt Mortgage and Finance Inc. at a loss, for about $300 million. CIT expects to see combined cash proceeds from both deals of about $1.8 billion.
"These sales complete our exit from all home lending businesses, removing the uncertainty surrounding this asset class, and advances our strategic transformation into a company focused entirely on commercial finance," said Jeffrey M. Peek, CIT chairman and chief executive, in a statement.
The home lending business consists of $9.3 billion in assets and related servicing operations. The servicing centers, which employ about 300 people, are located in Marlton, N.J. and Oklahoma City, Okla. In the second quarter, CIT expects to record a $2 billion loss on the home lending segment
The sale of the portfolios is scheduled to be completed this month, while the transfer of the servicing platform will be completed by the 2009 first quarter.
It is just the latest attempt by CIT to cut its risk and improve liquidity. Since April 1, CIT has raised $1.6 billion in new capital, completing asset-backed financings of about $1.5 billion, sold more than $2 billion in assets and obtained a $3 billion long-term financing facility from Goldman Sachs.
JPMorgan Chase & Co. and Morgan Stanley served as financial advisers to CIT. Wachtell, Lipton, Rosen & Katz and McKee Nelson, LLP served as legal advisers.
Like other financial services firms, CIT has struggled in recent months amid severe deterioration in the mortgage and credit markets. CIT has taken significant losses on its residential lending operations. It stopped originating new mortgages and has returned to focusing its business on commercial financing as part of its effort to shore up its capital base and improve liquidity.
Mortgages defaults have bee rising since the middle of 2007, forcing many banks to take charges and losses associated with the troubled loans.