Transamerica Financial Services Co. has completed the purchase of $1.03 billion of home equity loans from ITT Consumer Financial Corp.
The deal, which had been widely expected, represents a major expansion of Transamerica's home equity lending operation. Observers expect that Transamerica will try to sell additional loans to the borrowers in the 40,000 loans involved in the deal.
Transamerica Financial Services is a subsidiary of Transamerica Corp., San Francisco.
ITT Consumer Financial, a Minneapolis subsidiary of ITT Corp., has been shedding its financial services businesses over the last several months. Instead, ITT will concentrate on the leisure and entertainment industries.
A Transamerica spokesman said the loans would be distributed to about 500 regional branches, which will service them. Some staff increases will be made, although no details were immediately available, he said.
Industry observers have questioned whether Transamerica's sizable branch system is indeed profitable enough to merit its size.
The pool's 40,000 loans were made across the country. They average about $25,000.
Transamerica made about $3.28 billion of home equity loans last year. It had been servicing $4.1 billion of loans at yearend. The latest purchase will expand its servicing 25% to 30%, the spokesman said.
"What we will get out of this is economies of scale," he said.
In addition to selling more loans to the borrowers, Transamerica will continue to consider purchases of additional pools of closed home equity loans.
Industry insiders say GE Capital Mortgage Corp., Raleigh, N.C., is also trying to unload a pool of home equity loans.
A Transamerica executive, Jack E. Nelson, had said his company was close to purchasing $500 million of GE Capital's $1.5 billion pool. No deal has been announced.