July 1 (Bloomberg) -- CIT Group Inc., the business lender that's lost money for four straight quarters, agreed to sell its manufactured housing and home-loan businesses for $1.8 billion as it exits consumer lending. The stock rose 13 percent in early trading.

Lone Star Funds, the Dallas-based buyout firm, will purchase CIT's Home Lending unit for $1.5 billion in cash and take on $4.4 billion of debt and other liabilities, New York-based CIT said today in a statement. Vanderbilt Mortgage and Finance Inc. agreed to buy CIT's manufactured housing portfolio for $300 million.

``These sales complete our exit from all home lending businesses, removing the uncertainty surrounding this asset class, and advances our strategic transformation into a company focused entirely on commercial finance,'' Chief Executive Officer Jeffrey Peek said in the statement.

Peek, 61, said in May the company would try to raise as much as $12 billion through asset sales and financings, after CIT drew down $7.3 billion of emergency credit, cut the dividend and sold shares. Quarterly losses caused by bad home and student loans, including $249.7 million in the first quarter, raised concern that the 100-year-old company faced bankruptcy. Goldman Sachs Group Inc. agreed last month to provide $3 billion in financing.

CIT rose 89 cents to $7.70 at 7:58 a.m. New York time. Before today, CIT had lost almost three quarters of its value this year.

Credit-Default Swaps

Credit-default swaps on CIT fell 55 basis points to 715, according to broker Phoenix Partners Group, indicating improved perception of credit quality.

The swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.

A basis point on a credit-default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.

Lone Star, started by John Grayken in 1995, is investing a $5 billion fund that targets financial and real-estate assets. The firm mainly invests in Asia, a region competitors such as Blackstone Group LP and Kohlberg Kravis Roberts & Co. are also targeting.

CIT today said it probably had a pretax loss of $2.5 billion from Home Lending in the second quarter. The unit employs about 300 people in servicing units in Oklahoma City and Marlton, New Jersey.

JPMorgan Chase & Co. and Morgan Stanley advised CIT, which was founded in 1908 as the Commercial Credit and Investment Co.

To contact the reporters on this story: Andrew Frye in New York at afrye@bloomberg.net; Jon Menon in London at jmenon1@bloomberg.net.

Last Updated: July 1, 2008 08:16 EDT