CIT Sells its Manufactured Housing Loan Portfolio

This morning, CIT announced that it will sell off more than $2 billion in assets to an assortment of investors, including all of its manufactured housing portfolio.

CIT made an agreement with Vanderbilt Mortgage and Finance to unload its manufactured-housing portfolio for $300 million. The portfolio has a book value of $470 million, so this is quite a discount. Today, CIT’s shares are trading up.

This is an interesting deal. Warren Buffett is again proving that he is a contrarian, buying assets in a sector that others are fleeing. He has made money before by being right when popular opinion contradicted his assertions. Maybe this is that case, all over again.

Vanderbilt is one of Buffett’s two big plays in manufactured housing finance. Berkshire Hathaway, through its Clayton subsidiary, also owns 21st Century Mortgage.

Buffett gets more than just the assets. He is also buying the servicing rights to the portfolio. Servicing has held steady on credit-challenged assets. Wilbur Ross wanted the servicing for Option One. Bank of America is getting the servicing rights to Countrywide’s $1.5 trillion portfolio.

But this also matters because people like to pay attention to what Buffett buys. When Buffett buys, others follow. This week demonstrated just how much pull even a few chance words of his wisdom are worth. A steak lunch and an hour of Buffett are worth more than $2 million!

~ by samsondoggie on July 2, 2008.