Merrill Lynch & Co. is getting into subprime wholesale lending.
National City Corp. today announced the sale of its First Franklin lending franchise and related servicing platform to Merrill for $1.3 billion.
First Franklin, a subprime wholesaler, funded $6.8 billion during the second quarter, according to National City's earnings report. National City's total pipeline rose more than $2 billion to $30.6 billion as of June 30 -- fueled by activity at First Franklin.
Under terms of the agreement, Merrill will also gain direct-to-consumer lender NationPoint and National City Home Loan Services, which services First Franklin loans, National City and third parties.
"The sale will generate a significant amount of capital to redeploy for the benefit of National City shareholders and will allow us to further focus on our core banking, mortgage, and consumer lending businesses."
National City announced in July it was considering strategic alternatives for the three businesses.
Merrill executive Ahmass Fakahany reportedly hinted in May that the company might acquire a mortgage originator, noting it had excess capital.
In a separate transaction, National City reportedly expects to sell approximately $5.6 billion of its First Franklin-originated loans to Merrill's whole loan trading unit.