CIT Group to sell up to $4.2 billion in bonds to Freddie Mac

Posted Sep 20th 2007 4:45PM by Joseph Lazzaro
Filed under: Good news, Indices, CIT Group (CIT), Housing

It is not gargantuan good news, but it is a positive data point.

That's how one analyst characterized CIT Group's (NYSE: CIT) announcement that it plans to sell $3.5 billion-$4.2 billion in mortgage-backed securities to Freddie Mac (NYSE: FRE).

In general, analysts interpreted the deal as a positive for both CIT Group and investors: CIT Group, which is exiting the residential mortgage business, gets an infusion of capital, and investors can also rest somewhat easier knowing that CIT has succeeded in its overture access funds in the short-term credit markets.

CIT is retaining a considerable portion of the mortgage risk associated with deal. CIT's shares fell 85 cents to $41.04 in late Thursday afternoon trading.

Investment Category: Despite the positive announcement, CIT remains a moderate-risk stock not suitable for low-risk investors. Moderate-risk investors seeking a financial stock should consider waiting to see if CIT maintains a price above $42 in the weeks ahead, before buying shares.

Tags: CIT, CITGroup, FRE, FreddieMac, inthenews