NEW YORK -(Dow Jones)- The nation's housing-market meltdown has pushed yet another regional bank to cut and run from its mammoth mortgage-writing business.

First Tennessee Bank National Association, a unit of First Horizon National Corp. (NYSE:FHN) (FHN), announced on Wednesday it will sell its retail and wholesale mortgage lending operations - including more than 230 offices outside of Tennessee - to MetLife Inc. (NYSE:MET) (MET).

Precise terms of the deal were not disclosed, although First Horizon said it will sell the assets at book value and the deal will close in this year's third quarter.

Robert Patten, an analyst at Morgan Keegan & Co. Inc., said the sale "should free up at least $200 million in tangible capital" for First Horizon and leave it with a healthy balance sheet.

"This removes significant earnings volatility and frees up capital at a time when capital is king," said Patten.

Shares of First Horizon were up 4.6% to 10.06 in mid-afternoon trading Wednesday.

The assets included in the deal amount to a slew of offices as well as computer systems for writing and servicing home loans. The deal also includes loan-servicing rights, meaning the insurer MetLife (NYSE:MET) will assume some of First Horizon's loan-servicing business.

But in broader terms, the deal represents yet another bank's wholesale retreat from the lend-and-sell mortgage business, a once profit-happy business model that has all but disappeared since the subprime crisis took hold last year.

In early April, for example, Washington Mutual Inc. (NYSE:WM) (WM), a struggling West Coast thrift, said it swung to a $1.1 billion first-quarter net loss, and said it would close "all of its freestanding home loan offices." The firm also said it would shutter altogether its wholesale lending operations, or the business of writing loans through mortgage brokers.

During the housing boom, mortgage credit flowed freely as lenders and investors assumed that home-loan collateral - real estate - would continue rising in value and minimize lenders' losses if and when borrowers defaulted.

As that confidence in mortgage-lending grew, lenders like First Horizon earned frothy profits for writing home loans and then quickly selling those loans to secondary investors, who often in turn sold them to other investors.

Dave Miller, an investor relations official at First Horizon, said the business included in the sale was a "pure originate-and-sell model."

As home owners have increasingly fallen behind on their mortgage payments, and real-estate prices have fallen nationwide, investors interested in buying mortgages have all but disappeared - and, with them, a crucial cog in banks' lend-and-sell business models.

Unlike Washington Mutual (NYSE:WM) , which in raw terms simply packed up and left its standalone mortgage lending business, First Horizon was able to find a buyer for its mortgage lending operations in a move some analysts expected.

"We are pleased MetLife (NYSE:MET) recognized the value of our strong national mortgage franchise," said First Horizon's CEO, Jerry Baker.

The First Horizon mortgage operations issue loans to mostly high-quality borrowers and have historically written a minimal level of riskier Alt-A loans and no high-risk subprime loans, said Miller.

While the deal could certainly leave First Horizon with more cash and fewer expenses, and therefore more attractive to new investors, the news may nonetheless come as little comfort for the bank company's long-term investors. First Horizon stock has fallen by more than 77% since February of last year, when it traded at $44.66.

In March, moreover, the company slashed its dividend by more than half to 20 cents a share.

By Marshall Eckblad, Dow Jones Newswires; 201-938-4306; marshall.eckblad@ dowjones.com.

    (END) Dow Jones Newswires   06-04-08 1450   Copyright (c) 2008 Dow Jones & Company, Inc.