Following a charge of more than three-quarters of a billion dollars, CIT Group Inc. is getting out of residential mortgage lending.
In connection with the planned sale of the unit, a $765 million pretax charge was taken in the second quarter, CIT Home Lending's parent announced today. The charge, which is net of $228 million in pre-existing credit reserves, relates to a fair value adjustment from moving $10.6 billion in mortgage receivables to assets held for sale.
"All CIT's businesses must meet rigorous return standards," CIT Chairman and Chief Executive Officer Jeffrey M. Peek said in the company's earnings report. "As a result, we decided to exit home lending and construction enabling us to redeploy resources to higher returning businesses."
Charge-offs related to residential loans during the latest quarter were $38.4 million, CIT said.
"The provision for severance and real estate exit activities totaled $35 million for the quarter for cost saving actions across the company, which covered the elimination of approximately 300 positions," the report indicated.
The head count for all of CIT was 7,310 at quarter's end, the statement said.
CIT said its managed mortgage portfolio ended the second quarter at $11.9 billion in home loans, with 6.60 percent of the loans delinquent at least 60 days.
Last month, CIT agreed to sell its U.S. construction lending business unit to Wells Fargo & Co., according to a news release.