CIT mortgage business attracts interest

NEW YORK (Reuters) - CIT Group Inc. (CIT.N) said on Tuesday there's plenty of interest in its mortgage business as it prepares take up to $100 million in loan-related losses in the second half of the year.

CIT Chief Financial Officer Joseph Leone said the losses, about $45 million to $50 million each in the third and fourth quarters, will go against an already established reserve.

Leone also said CIT expects its mortgage portfolio to generate quarterly earnings of $40 million to $50 million in the second half of the year, excluding charge-offs and other costs.

CIT said there have been a number on inquiries from possible buyers for the mortgage business. The company announced its plans to exit home lending last month.

The commercial and consumer lender also said it could take a small hit against earnings if it does not find a buyer for its mortgage origination business, according to its quarterly filing with the U.S. Securities and Exchange Commission.

CIT recently reduced the book value of its home mortgage portfolio by 6.2 percent to $10.4 billion.

The reduction in fair value reflects a valuation provided by third-party market data and a discount to cover estimated losses over the entire life of the mortgages.

Last month, CIT said it was exiting the mortgage business and posted a surprise second-quarter loss as it became the latest to bail out of the struggling home loan sector.

CIT does not rule out future reductions in the portfolio's value if the mortgage market continues to deteriorate, A more rapid liquidation of the portfolio also could spark further reductions in its value, CIT said in an SEC filing.

Meanwhile, the company is looking for someone to buy its mortgage origination platform. If a buyer does not materialize, CIT may close down the operation, which would result in a pretax charge of $35 million for severance and other costs.

CIT said its home mortgage delinquencies had risen to $735.7 million, or 6.5 percent of receivables, in the second quarter from $544.3 million, or 5.02 percent, in the preceding three months.

Delinquencies in the student loan portfolio increased to $488 million from $453 million in the first quarter.

"We entered the third quarter with considerable liquidity and have since raised an additional $3 billion in July via a securitization of student loan receivables at an attractive financing cost," Leone said in a press release.

In the second quarter, the U.S. Attorney for central California requested billing and invoice histories for a portfolio of customer accounts that the company purchased from an undisclosed third-party vendor, the filing said.

CIT said it was cooperating with the document request, which is part of an ongoing investigation into the billing practices involving that portfolio.

(Reporting by Tim McLaughlin)