Federal regulator warns Fremont General
Regulators who forced Fremont General Corp. out of the sub-prime lending business last year have given the financial company until May 26 to find a buyer for its bank, Fremont Investment & Loan, or raise more capital, Fremont said Friday.
Seeking to preserve the bank’s dwindling capital, the Federal Deposit Insurance Corp. barred Fremont Investment from increasing compensation for officers and directors. The FDIC’s order, dated Wednesday, prevents the bank from transferring funds to the holding company or affiliates.
Fremont also was ordered to cut its interest rates on deposits to levels typical of California banks and thrifts.
One of the 10 largest lenders to high-risk borrowers during the housing boom earlier this decade, Fremont sold a troubled commercial lending unit last year and shut down its sub-prime mortgage business.
It has been looking for an investor to help revive it as a more conventional lender. Gerald J. Ford, a billionaire bank turnaround specialist, agreed in May to invest $80 million and run the company, but backed away in November.
Fremont said Feb. 28 that it had hired investment banks Credit Suisse Securities and Sandler O’Neill & Partners to raise capital or find a buyer. It’s uncertain whether such efforts will yield a solution that satisfies the regulators, Fremont said Friday. Its shares fell 9 cents to 52 cents on the day.
Last week, Fremont said it agreed to sell the rights to service $1.9 billion in mortgages to a subsidiary of Carrington Capital Management for an undisclosed sum.
The FDIC notified Fremont Investment & Loan in May that it was undercapitalized. The bank submitted a capital restoration plan in August, but the FDIC deemed it insufficient. The bank submitted a revised plan in November but this month said that plan was obsolete, the FDIC said in its order this week.
The FDIC provides insurance up to $100,000 per depositor plus $250,000 per retirement account. The agency’s toll-free information line is (877) ASK-FDIC.
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