National City Corp. has completed the sale of $3.6 billion in loans originated by its subprime mortgage lending subsidiary, First Franklin Financial Corp., and expects to realize a $1 billion gain on the sale of First Franklin’s origination and servicing platform by the end of the year.
The sale of $3.6 billion in First Franklin loans was less than planned because of payoffs and exclusions permitted by the sale contract, National City reported Thursday in a Securities and Exchange Commission filing. Another sale of $650 million in First Franklin loans is expected to close in December.
The sale of First Franklin to Merrill Lynch & Co. is subject to regulatory approval and expected close by the end of the year, National City said.
In the meantime, First Franklin added 46 employees in November and has boosted its workforce by 116 workers since this spring, to 2,506. Total employment at National City stood at 33,751, down from 34,470 at the same time last year. The total includes 6,848 employees at National City Mortgage, 640 workers at National City Home Loan Services, and 438 employees at National City Home Equity.
At $33.8 billion, mortgage loans First Franklin services for third parties have more than doubled from the $15.1 billion serviced for others in November 2005.
First Franklin originated $2.56 billion in loans for sale during November, compared with $2.85 billion in October and $1.55 billion in November 2005. The average credit score of loans originated by First Franklin in November was 657, compared with 652 last year, and the average note rate was 8.08 percent, up from 7.83 percent last November. Thirty-five percent of loans originated were refinances, compared with a 12-month high of 37 percent in October and 24 percent in June, the low for the year.
At National City Mortgage, refinances represented 56 percent of $3.18 billion in loan originations for sale, up from 51 percent of $3.43 billion in originations for sale in November 2005.
First Franklin’s loan portfolio at the end of the month totaled $7.9 billion, compared with $18.8 billion at the same time last year. During that time, the average loan size shrunk from $111,752 to $93,614, and the average credit score slipped from 652 to 629. Loan-to-value ratio averaged 77.75 percent, compared with 77.58 percent in November 2005, and the average interest rate on First Franklin loans was up 80 basis points, to 7.92 percent.