CIT to close Livingston lending unit

From the Record:

CIT will end home mortgage operation

CIT Group Inc., the nation’s largest independent commercial-finance company, said Tuesday it will close its Livingston-based home-lending unit and eliminate 550 jobs around the country within the next 30 to 60 days.

Company spokeswoman Mary Flynn said in a telephone interview that she did not have any information on how many, if any, of those jobs are in New Jersey.

“We are working with the affected employees to help ease the transition,” she wrote earlier in the day in an e-mail response to questions. “Severance will be provided.”

Like many mortgage lenders that serve high-risk borrowers, CIT’s home-loan division was clobbered this year by the investment community’s loss of appetite for such loans, amid rising defaults and concerns about the value of the homes that back the loans in a sluggish real estate market.

The company said in a statement it will take a $35 million third-quarter charge for severance and other exit costs.

CIT, which employed 7,354 people at the end of 2006, said this month it planned to close a business-finance office in Mahwah at the end of September and lay off the 137 employees who work there.

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2 Responses to CIT to close Livingston lending unit

  1. James Bednar says:

    From the Star Ledger:

    CIT Group abandons the lending ship

    CIT Group, after surprising Wall Street last month with a nearly half-billion-dollar mortgage portfolio writedown that spawned a second-quarter loss, yesterday dropped the other shoe: a $35 million charge to cover 550 job cuts at the 25 home lending offices being shut down nationwide.

    One analyst, who asked not be identified, said yesterday’s action was no surprise, given CIT’s July 18 announcement that it was marking down its entire $10.6 billion home mortgage portfolio for sale. That decision prompted the company to take a $495.3 million charge, which resulted in a second-quarter net loss of $234.5 million or 70 cents a share.

    CIT, which employs 1,000 in its executive offices in Livingston, is just the latest to abandon mortgage lending amid difficult market conditions. The move will mean the elimination of 550 jobs in 25 offices. Overall, CIT has about 7,350 employees.

    Joel Naroff, chief economist of Commerce Bancorp, said the latest move by CIT, “is a reminder that there are still more adjustments to be made. This is a credit issue, not a stock market issue, and we haven’t seen the full shakeout and the full impact of the reduction in credit that is going on around the country.”

    Rutgers economist Jim Hughes said the CIT departure from the mortgage market, “is another piece of evidence that the era of extraordinarily cheap capital is over.”

    The housing slowdown probably started in the fall of 2005, and “we certainly have not reached the bottom yet,” Hughes said. In New Jersey home prices rose 130 percent from 1998 to 2006, and during this housing boom, “there were people in the housing market who shouldn’t have been there, and mortgages were given out at very low rates.” Price peaked in 2006 and may decline into 2009, Hughes said. “Prices may not decline a lot, but it could be 2016 before prices return to the 2006 level.”

  2. Pete Olinsky says:

    Wall street liked the news the stock was up 3/4 for the day

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