AIG Subprime Unit in Stock Sell-Off

The government and a group of private investors plan to spin off the insurer's subprime lending and servicing division by selling $500 million of stock to the public.

INN Breaking News, May 23, 2011

Paul Muolo

The government and a group of private investors plan to spin off the subprime lending and servicing division of American International Group by selling $500 million of stock to the public through a real estate investment trust.

One mortgage banker, requesting his name not be used, said he has already been approached by the AIG unit, called Springleaf Financial, about selling what he called "hard money" mortgages to the company.

Springleaf until early March was known as American General Finance, a decades-old and once well-regarded nonprime lender/servicer in Evansville, Ind.

According to an regulatory filing with the Securities and Exchange Commission, Springleaf owns $13.4 billion of residential real estate loans and $3.5 billion of consumer finance loans.

The government owns about 20% of Springleaf AIG, with FCFI Acquisition LLC owning the rest.

A unit of Fortress Investments manages the company and one of Springleaf's servicing partners is Nationstar, which recently filed to go public. Frederick Geissinger, Springleaf's chief executive officer, did not return a phone call about the spinoff plans.

Springleaf has 1,100 branches across 40 states, Puerto Rico, the U.S. Virgin Islands and England.

According to the SEC filing, it plans to originate and buy mortgages, and hold them in portfolio but also hopes to securitize them one day.

"I really hope this happens," said the mortgage banker who was contacted by Springleaf. "We really need someone to get into the subprime space now. This business has tremendous potential but no liquidity."

This story has been reprinted with permission from American Banker.

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