PHH Corp., the New Jersey-based mortgage and auto-leasing company, scrapped a $1.8 billion sale to General Electric Co. and Blackstone Group LP after the buyout firm said banks reneged on an agreement to lend the money.

Blackstone’s banks refused to finance the purchase of PHH’s mortgage division, the New York-based private-equity company said in an e-mailed statement yesterday. The lenders, JPMorgan Chase & Co. and Lehman Brothers Holdings Inc., declined to comment.

PHH “will determine in due course whether to continue to explore the company’s strategic alternatives,” the chairman, A.B. Krongard, said in a statement yesterday. GE agreed in March to buy the whole company for $31.50 a share and keep the leasing unit. The shares haven’t traded at more than $28 since September 17, when PHH said the banks might fail to raise the funds.

A record $186 billion of private-equity purchases such as the acquisitions of Harman International Industries Inc. and Affiliated Computer Services Inc. collapsed last year, after losses tied to subprime mortgages cut demand for the higher-yielding loans and bonds used to finance buyouts. JPMorgan, Citigroup Inc., Goldman Sachs Group Inc., and Morgan Stanley have offered discounts of up to 10% to clear a backlog of debt after a record $787 billion in leveraged buyouts last year.

PHH fell 14 cents to $17.64 in New York Stock Exchange composite trading yesterday, 37% less than its $27.81 price on March 14, the day before the agreement was announced.

“Blackstone was prepared to close its end of the transaction using the financing that in March was originally committed to be made available,” the buyout firm said in the e-mailed statement. “We regret that the banks are now unwilling to provide financing under the terms they originally agreed to.” Blackstone didn’t name the banks, which PHH identified in the September 17 statement.

A termination fee of $50 million is being sought from Blackstone by PHH, based on the agreement’s terms. GE, based in Fairfield, Conn., was to buy the vehicle-leasing unit through its commercial finance division.

PHH, based in the Philadelphia suburb of Mount Laurel, N.J., has provided mortgages and related services such as billing for other companies to offer under their own brands, including American Express Co. and Charles Schwab Corp.

Bankers at Merrill Lynch & Co. and Gleacher Partners LLC and lawyers from DLA Piper US LLP and Stikeman Elliott LLP advised PHH in the transaction, according to Bloomberg data. The buyers’ law firms included Weil, Gotshal & Manges LLP, Simpson Thacher & Bartlett LLP, and Hogan & Hartson LLP.

“There can be no assurance that any further exploration of strategic alternatives that the board may determine to undertake will result in any agreements or transactions,” PHH said.

Leveraged buyouts declined to $203.4 billion in the second half from $583.7 billion in the first six months as the subprime debt market collapsed.

Interest rates on loans rated B rose to 4.28 percentage points more than the three-month London interbank offered rate, a lending benchmark, from a low of 2.13 in February, according to Standard & Poor’s. Lower premiums earlier in 2007 allowed private-equity firms led by Kohlberg Kravis Roberts & Co. and Blackstone to pursue the biggest LBOs ever.

A spokesman for Blackstone, John Ford, Brian Marchiony of JPMorgan, and Hannah Burns of Lehman all declined to comment.