Subprime lender halts residential mortgage line
Fremont's Tampa staffers are in jeopardy of losing their jobs.
By SCOTT BARANCIK
Published March 6, 2007
As the stocks of subprime mortgage lenders melted down Monday on Wall Street, one struggling bank put several hundred of its Tampa employees on ice.
Fremont Investment & Loan, the country's eighth-biggest subprime lender, told most of its Tampa staff to stay home Monday on paid leave. The move followed news that Fremont General Corp., its California-based parent company, had decided to quit lending money to home buyers who have bad credit and to try to sell that business line. Tampa staff were told to expect an update on their status Wednesday. Their future will depend in part on whether the residential mortgage business is sold, and to whom.
"As far as how individual offices will be affected by this, it's really too early to say," said Dan Hilley, a company spokesman.
Fremont's stock, which began the year at $16.21 per share, dropped 32 percent Monday to close at $5.89. It had plenty of company. New Century Financial Corp., ranked No. 2 on National Mortgage News' list of the largest subprime mortgage lenders, saw its stock fall 69 percent to $4.56 amid fears it might file for bankruptcy protection. Higher-than-expected default rates are causing most of the hand-wringing.
Other subprime lenders - those who cater to borrowers with below-average credit - with significant bay area operations include third-ranked Countrywide Financial Corp., for which Tampa is one of four regional hubs, and New Century. Local economic development officials helped attract thousands of financial-service jobs in recent years while the industry enjoyed a growth spurt.
Because it markets its loans to mortgage brokers rather than directly to consumers, Fremont is less well-known than some of its competitors. But the company issued $3.9-billion worth of residential loans to Florida homebuyers in 2005, more than any other state but California and New York.
Fremont's decision to stop issuing residential mortgages was prompted in part by recent Federal Deposit Insurance Corp. demands that it reform its lending practices. The company is not putting the brakes on all of its business lines, however. It plans to continue offering retail deposit accounts and to issue commercial mortgages.
But even its commercial loan business showed some signs of weakness lately. In January, the company filed two foreclosure lawsuits against a St. Petersburg developer it had loaned a total of more than $50-million.
Scott Barancik can be reached at email@example.com">href="mailto:firstname.lastname@example.org" mce_href="mailto:email@example.com">firstname.lastname@example.org or (727) 893-8751.
* Subprime mortgages are loans made to borrowers who are considered to be higher credit risks because of past payment problems, high debt relative to income or other factors.
* Lenders typically charge higher interest rates - as much as 4 percentage points more than more credit-worthy borrowers pay.
* Because of that, they are typically one of the most profitable types of mortgages.
[Last modified March 6, 2007, 06:31:51]
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