Fremont General Cuts Secondary Subprime Operation

February 14, 2007 No Comments »

Fremont General Corp., a Santa Monica, CA based regional bank and mortgage lender has dropped its secondary subprime lending amid worsening market conditions.

The decision came at a time when many other subprime lenders were shutting their doors, and large banks were ceasing their subprime operations entirely.

Fremont General Corp. decided to stop offering “piggyback” seconds, or second liens, many of which were offered at 100% combined loan-to-value.

As house values continue to drop and defaults rise, the market for second mortgages has seen a sharp drop in demand on the secondary market, mainly because second mortgages are the last to get repaid in the event of a foreclosure.

The secondary mortgage business only made up 8.7% of Fremont’s total lending in 2005 and 8.1% in 2006, but the news was still favored by investors.

The move, which is largely a guideline change, sent shares on the NYSE up 10.96% to end the day at $13.16, just above the 52-week of $11.70.

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