Most subprime mortgage lenders have been doubling and tripling originations in recent years, but not the finance division of CIT Group.
When you're part of one of the nation's top 10 financial services companies, you can take your time to originate carefully, says Thomas B. Hallman, president and chief executive of the consumer finance division of CIT Group.
Home equity loan originations for the Livingston, N.J.-based division probably will grow 20% annually, he said.
"It's not meteoric growth - we're not going to jump leaps and bounds. It's not exciting, but it's our culture," he said. "It works in the long run."
The division expects to make $1.3 billion in loans this year.
CIT Group's four-year-old finance division is "very different" from most other subprime mortgage lenders, said Duff and Phelps analyst Reilly Tierney.
The division "can pick and choose" the loans it wants to originate, because it is just one piece of the pie at CIT Group, Mr. Tierney said.
The $19 billion parent company, which is 80% owned by Dai-Ichi Kangyo Bank Ltd. and 20% owned by Chase Manhattan Corp., provides commercial and consumer credit through eight divisions.
The luxury of low pressure on origination growth helps insure that CIT Group doesn't stretch underwriting standards, Mr. Tierney said. "Like Associates (the subprime mortgage division of Ford Consumer Credit), CIT Group won't get lulled outside their box."
CIT Group's consumer finance division pulls in almost two-thirds of its business from a network of over 2,000 brokers.
Brokers demand a wide range of products, Mr. Hallman said, and a high level of service-and sometimes the company's conservative standards prompts brokers to go elsewhere. "We don't get all of the broker business, but we don't expect to," Mr. Hallman said.
The company will not make loans exceeding a home's value, despite the popularity of a new 125% LTV product. "The jury's still out on these loans," Mr. Hallman said.
Despite limiting their product line, CIT Group has maintained strong relationships with brokers, he said. "Brokers are a lot more loyal than people give them credit for," he said. Consistency, comparable pricing and service have insured broker loyalty, he said.
CIT Group will begin securitizing many of its subprime mortgage loans this summer, Mr. Hallman said. But, the company is committed to maintaining the same standards it had before securitization.
"We're not in this business to be out of it next year," Mr. Hallman said.
