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Subprime chaos claims Tampa jobs

Fremont Investment & Loan alerts Tampa employees their jobs will end May 18.

By Scott Barancik, Times Staff Writer
Published March 20, 2007

So long, paycheck.

Citing growing woes of its subprime mortgage unit, Fremont Investment & Loan told several hundred Tampa employees Monday it will lay them off May 18. The troubled California lender had put its Tampa staff and hundreds of others nationwide on indefinite paid leave two weeks ago after disclosing regulator concerns over its allegedly risky lending practices. A subsequent plan to sell the unit has not yet proved successful.

"Given the uncertainty of this situation and its impact on employment, the company has given notice of termination to these employees on leave," the company said in a statement.

Fremont is one of a growing number of subprime lenders - those who issue high-interest loans to high-risk borrowers - to run into financial and regulatory trouble in recent months. A marked increase in mortgage delinquencies and foreclosures in the bay area and beyond has roiled the stock market amid concern that the problem poses danger to the broader economy. Several lenders have filed for bankruptcy court protection.

But Fremont's troubles are also taking a toll on the local employment scene. Tampa is one of its residential mortgage division's four regional hubs, and hopes that the staff here would keep their jobs under a new acquirer have faded.

This is not the first time Fremont has exited a business under pressure from regulators. According to the New York Times, California regulators in 2000 took control of Fremont's workers compensation insurance unit, which had used questionable methods to generate huge revenue growth.

In an October suit, California's attorney general alleged that Fremont officials significantly increased the risks of the insurance policies it wrote in the 1990s without telling its reinsurers, which bore much of the financial responsibility. For example, it allegedly changed 139 "high hazard" business classifications for potential customers from "prohibited" to "allowed."

A Fremont spokesman declined Monday to provide an exact count of the Tampa staff being laid off. Overall, its subprime unit employs a total of 2,400. As of late afternoon, officials at the state's Agency for Workforce Innovation had not received written notice of the impending cuts. Fremont's stock fell 9 percent Monday to $8.07.

Also Monday, a Securities and Exchange Commission official said the agency was investigating a number of subprime lenders. The SEC does not identify its investigation targets in advance.

Times staff research Caryn Baird contributed to this report, which used information from Times wires. Scott Barancik can be reached at barancik@sptimes.com">href="mailto:barancik@sptimes.com" mce_href="mailto:barancik@sptimes.com">barancik@sptimes.com or 727 893-8751.

[Last modified March 19, 2007, 23:32:23]