Fremont Group to sell mortgage unit

$4bn deal sought after regulators order end to risky lending.

    Subprime lenders are suffering from defaults [AP]

    Matt Howlett, an analyst from Fox-pitt, Kelton, said: "It's a huge positive and a big step toward exiting the sub-prime business. The market was expecting a much bigger loss. Also, with this sale, Fremont doesn't have to keep the loans on its balance sheet, which could have created bigger losses."
     
    Sub-prime lenders, which make home loans to borrowers with poor credit histories, are struggling from rising delinquencies and defaults.

     

    Many are selling sub-prime units, and more than two dozen have quit the sector in the last year.

     

    Risky business

       

    Last Friday, Accredited Home Lenders Holding, a San Diego-based sub-prime lender, said it would sell $2.7bn of loans, resulting in a $150m pretax charge.

     

    Fremont this month stopped making residential loans and has hired Credit Suisse to help sell its Fremont Investment & Loan sub-prime unit.

       

    Fremont had said it would comply with a federal deposit insurance order barring it from risky lending.

     

    It also notified some of the 2,400 people in its sub-prime unit that they would lose their jobs on May 18.

       

    The company is still operating its commercial real estate lending operations and accepting deposits.

       

    Howlett said Fremont's mortgage sale plan "demonstrates there is plenty of liquidity in the market for sub-prime loans, and increases the chances that Fremont can sell its lending platform cleanly".

    SOURCE: Agencies


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