Fremont General Must Recapitalize or Sell Banking Unit
The New York Times is reporting that the FDIC has ruled Fremont General’s banking unit under-capitalized and must find additional funds or sell the unit in two months. Fremont, which should be considered the bastion of terrible underwriting, received default notices related to $3.15 worth of subprime loans. And we’re talking SUBPRIME. Fremont was known as the “get it done” place of last resort for many of the most subprime loans. My favorite was their self-employed borrower guidelines. If you were self-employed and couldn’t prove a) your income or b) you actually owned a business you could state your income (like everyone else) and use 3 letters of reference if you couldn’t produce say a business license or any documentation that you actually were in business for yourself. Seems like good, commonsense underwriting to me!
The New York Times on Fremont’s FDIC call for recapitalization:
The Fremont General Corporation, the mortgage lender, said Friday that banking regulators declared its banking unit undercapitalized and had required the company to raise money or find a buyer in two months.
Fremont, which earlier this month received default notices related to $3.15 billion of subprime mortgages and said its survival could be threatened if it were sued, said that the company had received a directive from the Federal Deposit Insurance Corporation requiring it to take corrective action by May 26.
Those actions may include selling shares or other obligations in order to recapitalize its banking unit Fremont Investment and Loan, divesting the bank, or accepting an offer to merge or be acquired.