is saying ''yes'' to
and Fortress Investment Group.
The Cleveland bank says it sold the $2.5 billion sub-prime mortgage portfolio owned by its home loan subsidiary, Champion Mortgage, to HSBC Finance. In a separate agreement, Key says it's selling Champion's mortgage origination platform to hedge fund and private equity firm, Fortress, which has $28 billion in assets.
Key did not say how much money it is receiving in both transactions.
Champion, a New Jersey-based company which provides mortgage financing and home equity loans in 26 states, is known for its catchy advertising tag line in which Champion's founder, Joseph Goryeb says: "When your bank says 'no,' Champion says 'yes.'"
Sub-prime mortgages are high-interest loans offered to borrowers with shaky credit histories, who are considered riskier borrowers.
Key is not the only bank veering away from sub-prime business as the mortgage industry takes a tumble for the worse. A number of companies in recent months have also put their mortgage operations on the block with Wall Street investment firms emerging as the main buyers.
said in September that it would pay $1.3 billion to buy
First Franklin mortgage franchise.
Bear Stearns Residential Mortgage, a subsidiary of
, agreed in October to purchase the sub-prime mortgage origination platform of Encore Credit, the subsidiary of
, an Irvine, Calif.-based REIT for $26 million in cash.
And just last month
said it was considering "strategic alternatives" for Option One, its sub-prime mortgage business, including a sale or "public market transaction." The Kansas City, Mo. tax services provider hopes to have a definitive answer in early 2007, it says.
One reason Wall Street investment banks are buying up sub-prime lenders is to gain control of the originators of loans that can be repackaged in asset-backed securities and sold to institutional investors.
Key expects to take an after-tax charge of $164 million or 40 cents a share this quarter due to a $170 million goodwill write-off it took when the bank purchased Champion in 1997, it says. Next year, Key expects to take additional charges of $25 to $30 million before taxes to reflect the sale.
Key announced in August that it was putting the unit up for sale. The sale of the portfolio was completed on Wednesday, while the sale of the origination platform is expected to close sometime in the first quarter of next year, it says.
Fortress recently filed plans for an IPO. It is the first U.S. hedge fund to go sell shares to the public.
Shares of Key rose 2 cents, to $36.12.