Commercial lender CIT Group Inc. agreed to sell its home lending business to private equity firm Lone Star Funds for $1.5 billion in cash to increase liquidity, and will take a related second-quarter charge of $2 billion.

CIT also agreed to sell its $470 million manufactured housing portfolio to Vanderbilt Mortgage and Finance Inc for about $300 million. Coming after four consecutive loss-making quarters, this news lifted the company's stock by as much as 13 per cent. Before this, the stock had lost 75 per cent of its value in 2008.

''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,'' CIT CEO Jeffrey Peek said.

Earlier in May, he had said that CIT would try to raise as much as $12 billion through asset sales and financings, after it drew down $7.3 billion of emergency credit, cut the dividend and sold shares.

Consecutive quarterly losses, including $249.7 million in the first quarter of 2008, had led to concerns on its survival. Goldman Sachs Group Inc. agreed last month to provide $3 billion in financing.

Dallas-based Lone Star will also be taking on $4.4 billion of outstanding debt and other related liabilities. It 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. It was recently in the news after its Asia head was exonerated of stock manipulation charges in South Korea. (See: Lone Star chief cleared of stock manipulation, may accelerate HSBC purchase of KEB)

The sale of the portfolios is expected to close in July, while the transfer of the home lending servicing platform will be completed by the first quarter 2009, CIT said.

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. Net cash proceeds from the transactions are expected to be about $1.8 billion, the company said in a statement.

JPMorgan Chase & Co and Morgan Stanley served as financial advisors to CIT.

CIT Group Inc. (an abbreviation of an early corporate name of Commercial Investment Trust) is a leading global commercial and consumer finance company, founded in 1908. CIT has more than $74 billion in managed assets.

CIT is a Fortune 500 company and is a part of the S&P 500 Index, and is a leading participant in vendor financing, factoring, equipment and transportation financing, Small Business Administration loans, and asset-based lending, and does business with more than 80 per cent of the Fortune 1000.

The company's global headquarters are in New York City, and the company has more than 7,300 employees in locations throughout North America, Europe, Latin America, and Asia Pacific.