CIT Group Streamlines Mortgage Unit, Sells Financial Freedom
As part of its strategic efforts to simplify mortgage business, CIT Group Inc. CIT has completed the sale of Financial Freedom and the reverse mortgage portfolio to an undisclosed buyer. With this, the company exited the reverse mortgage operations. The news cheered investors with the company’s shares rising 2.2% following this announcement.
Financial Freedom became part of CIT Group when the latter acquired OneWest Bank in August 2015. The unit has been part of the company’s discontinued operation since then.
As of Apr 30, 2018, the deal, announced in October 2017, consisted of the sale of mortgage servicing rights and $879 million worth of reverse mortgage whole loans and other real estate owned assets.
Additionally, CIT Group has outsourced the payment, servicing and administration of duties of the ongoing mortgage portfolio to a leading national provider of residential servicing. This portfolio was worth roughly $5.2 billion as of Mar 31, 2018.
The ongoing mortgage portfolio includes consumer single family home loans for buying a new property or refinancing an existing one. This is mostly done through both the national CIT Bank direct franchise or through the OneWest Bank branch franchise in Southern California. The company also indirectly originates residential mortgage loans, mainly through a network of correspondent lenders.
The Chairwoman and Chief Executive Officer of CIT Group, Ellen R. Alemany said, “We have addressed another legacy issue by exiting the reverse mortgage business, and we have created greater efficiency in our ongoing mortgage operation by partnering with an industry leader to service our portfolio.”
CIT Group remains focused on strengthening its core commercial and consumer operations. As part of this initiative, the company announced a deal to sell its European Rail business in June 2017 while in April 2017 it sold stakes in the joint ventures with Tokyo Century Corporation and divested its aircraft leasing business. Over the last few years, the company has divested its Canadian, Brazilian and Mexican businesses, among others.
Driven by these efforts, investors seem to be bullish on the stock. Shares of CIT Group have gained 14.4% in a year’s time, outperforming 9.1% rally for the industry.
Currently, CIT Group has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Since the financial crisis of 2008, other financial institutions including Bank of America BAC, Morgan Stanley MS and Citigroup Inc. C have simplified their businesses and focused on core operations.
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