The U.S. government and a group of private investors plan to spin off the subprime lending and servicing division of American International Group (AIG), by selling $500 million worth of stock to the public – through a REIT structure.

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 based in Evansville, Ind.

According to a new S-11 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. Over the years it has mostly declined to talk to the media.

Uncle Sam owns about 20% of Springleaf (via) AIG with FCFI Acquisition  owning the rest. (FCFI quietly bought FCFI last fall.)

A unit of Fortress Investments manages the company and one of Springleaf’s servicing partners is Nationstar, which recently filed to go public.

Both the purchase of Springleaf (American General) and the public spinoff of the unit have received no publicity. Springleaf CEO Frederick Geissinger did not return a telephone call about the spinoff.

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

According to the 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.”

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