California Mortgage Company Feeling Pressure, Looking to Sell
Fremont General Corp., the California bank trying to sell its home loan lending operations, told the unit’s staff they may likely be dismissed in two months.
Employees will receive pay and benefits through May 18 unless they take other jobs, Kyle Walker, CEO of the Fremont Investment & Loan subsidiary, told employees.
“The company has aggressively been pursuing its options,” Walker said. “Such efforts continue, although the company cannot provide more definitive information today.”
Fremont announced March 2 that it hired Credit Suisse Group to help sell the mortgage business after being cited by the Federal Deposit Insurance Corp. for making loans to “subprime” borrowers who couldn’t pay them back.
The news follows recent announcements that Countrywide Mortgage, the nation’s biggest lender, is also feeling the heat. California requires employers to give workers 60 days notice before “a plant closing or mass layoff.”
Walker told the California mortgage employees on the conference call they would receive a written notice confirming the termination date.
“This is a formality,” he said. “If your situation should change, we will notify you directly or through your local management team, so it’s very important you keep in contact with your management during this period.”
Fremont, one of many bad credit home loan providers embroiled in myriad financial problems at the moment, told workers March 7 that “five or six interested parties” may be interested in an acquisition.
The mortgage company’s shares have fallen by half this year over concerns that bad loans in the U.S. subprime market would lead to losses and reduce the unit’s worth to potential buyers.
On Friday, Credit- Based Asset Servicing and Securitization LLC cut the price it would pay in a previously announced takeover of Maryland mortgage company Fieldstone Investment Corp., based in Columbia, Md., citing the “severe deterioration of the market for subprime loans.”
Accredited Home Lenders Holding Co., a rival California mortgage lender based in San Diego whose shares have fallen more than 60 percent this year, said today it may lose its Nasdaq Stock Market listing because the company failed to file an annual report on time.
Subprime loans, a term applied to some of the riskiest home mortgages, are made to borrowers with poor credit ratings or high debt burdens. Loans in the Alt-A mortgage sector - a step above subprime but below prime rate - have also experienced problems of late.
SOURCE: Bloomberg Media