Fremont Sends Employees Packing With Subprime Exit

Fremont General Corp. has put a number of their employees on paid leave "pending further information" after the company was issued a cease-and-desist which prompted an exit from the subprime business.


The cease-and-desist issued by the Federal Deposit Insurance Corp. (FDIC) demanded the end to 14 violations including ``unsatisfactory lending practices'' and ``operating with a large volume of poor-quality loans.''

Santa Monica, California-based Fremont recently announced that it would delay reporting earnings for the fourth quarter, as well as annual results, a move that sent company shares to their lowest level since 2003.

Following the announcement, Fitch Ratings put Fremont on "Rating Watch Negative."

Earlier this year, the subprime wholesaler announced that it had once more tightened its underwriting guidelines and had discontinued its "piggyback" second mortgages.

For the first nine months of 2006 the company's net income was $113.1 million, plummeting 59% from $273.4 million for the same period in 2005.

"The regulators did not seek any changes in the company's retail deposit-gathering business,'' the company said in a statement.

Fremont also intends to continue to offer commercial real estate loans.

"Thanks in part to its very substantial equity and $8 billion retail deposit franchise, Fremont Investment & Loan has significant balance sheet strength and funding capacity that we believe will enable us to exit the subprime lending business in an orderly and disciplined way," said Fremont President and CEO Louis J. Rampino in the statement.

The financial services holding company has taken on Credit Suisse Securities LLC to help find a potential buyer.