Fremont Investment and Loan
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Fremont Investment has a decent amount of equity capital and concentrates itself on issuing and acquiring commercial real estate loans that have been financed through the deposit accounts insured by the Federal Deposit Insurance Corporation (FDIC) to the tune of at least $100,000 and up to the maximum legal limit. The total assets of “Fremont†were at $11.5 billion as on December 31, 2005.
FIL, which has its primary function of a commercial real estate lending and residential loan servicing company, is partially funded by the advances made through the Federal Home Loan Bank. Fremont has a unique service of Real Estate Owned (REO) listing properties, which are up for sale and are listed with local brokers.
As per the latest announcement by the Fremont General Corporation on April 16, 2007 on behalf of FIL, the subsidiary has entered into an agreement to sell about $2.9 billion of its sub prime residential real estate loans to an accredited institution. Under exclusive negotiations with the same institution, FIL had also executed a letter of intent whereby FIL plans to sell most of its residential real estate business and assets, however continuing with its nationwide commercial real estate lending business and retail deposit franchise. As a result, the institution will acquire the residential loan servicing platform as well as a portion of the sub prime loan origination platform of FIL.
With its increased functions in the sub prime home mortgage business, Fremont Investment still remains the leader in residential loan servicing as there is no assurance that the transaction proposed in the letter of intent will be completed per se. US bank regulators have ordered FIL to tighten its loan policies and operations to prevent heavy future losses in case of loan defaults by borrowers. Allegations have also surfaced that “Fremont†was working without adopting effective risk management policies and procedures in its sub prime mortgage and commercial real-estate lending operations. FDIC stated that the institution was making sub prime mortgage loans without checking with the borrowers ability to pay that was increasing the likelihood of losses for the concern sending a wrong signal across the real estate loan market jeopardizing its stability. However, the problem seems to be sorted out now with the accord between the FDIC and FIL.
