Fitch Comments on CIT's $1.8B Home Lending Sale

Business Wire, July 1, 2008

NEW YORK & CHICAGO -- CIT Group (CIT rated 'A-'/'F2', Negative Outlook by Fitch) announced today that it has agreed to sell its home lending business to Lone Star Funds for $1.5 billion cash and the assumption of $4.4 billion of debt. Separately, CIT also agreed to sell its manufactured housing portfolio to Vanderbilt Mortgage and Finance, Inc. for $300 million.

While the sale does not prompt a rating action at this time, Fitch views CIT's exit from home lending positively, as this segment has grown increasingly problematic over the last several quarters. The sale generated a pre-tax loss of $2.2 billion, reduced managed assets by roughly 12% and reduced tangible equity to managed assets (TEMA) to more normalized levels. At June 30, 2008, management expects TEMA to be in excess of 9%, above the company's 8.5% target. While the transaction adds liquidity and significantly reduces earnings volatility in the near term, Fitch expects operating performance to improve with leverage remaining relatively steady. Also, Fitch does not expect planned asset sales and divestitures to materially impact earnings going forward.

For Fitch to consider a Stable Outlook the company must complete its strategic initiatives and return to the unsecured debt markets. Longer term, Fitch will determine if operating performance, earnings diversity and underlying funding mix and leverage support the current rating.

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