March 04, 2007

Ready for the other shoe? Subprime lender Fremont blows up, internal memo leaked?

Here's the news on Friday that sent the stock plummeting (again):

Fremont General Corporation to Exit Sub-Prime Residential Real Estate

Fremont General Corporation, a nationwide real estate lender doing business primarily through its wholly-owned industrial bank, Fremont Investment & Loan ("FIL"), today announced that it intends to exit its sub-prime residential real estate lending operations.

And here's the leaked internal email (may or may not be legit - we'll see tomorrow) that hit the internets tonight (note - I have no FMT position):

From: Brian Daily
Sent: Sun 3/4/2007 4:22 AM
To: *Tampa 2 Office; *Tampa 1 Office; *ResRe Tampa 1 AE
Subject: Fremont ceasing doing business.

Teams,It is with great regret that I must inform you that Fremont Investment and Loan will cease funding loans and doing business. At 12:35 (pst) Saturday, Fremont General received notice from the FDIC that they are not permitting any more loans to be funded by Fremont. In short, our funding available was terminated by the Federal Home bank.

The suddenness of the change and the shift from our communication literally less then 24 hours previously simply perplexes me. However, this simply validates the volatility on our business.

None of us in Hawaii realized or appreciated the gravity of the situation we were facing. There are many questions that many of you have. There is a conference call that will be conducted on Monday that will answer many of these questions that you will have.Jerry Casanova will be able to communicate with you more specifics on Monday morning. Please show up for work to receive these instructions.

I will be leaving the meeting here in Hawaii early and attempting to return to the office sometime on Monday.In order to assist our clients with some instructions-


Anonymous said...


Let the law suits fly and the blame game begin. It is on.

Mort said...

Who could have predicted this, I mean it's all so sudden. This is all due to unforeseen circumstances beyond our control. We're lenders, that's what we do, who took away our koolaide? Bastidges!

Anonymous said...

Troubled subprime lender Fremont General (NYSE:FMT) said late Friday it will exit subprime residential lending, citing mounting pressure from loan repurchases and likely regulatory action. The company had first hinted at problems on February 28, when it said it would delay its fourth quarter and full year earnings.

The company said its decision to exit was prompted primarily by the receipt of a Proposed Cease and Desist Order from the FDIC on February 27.

Fremont said it has entered into discussions to see if it will be possible to sell its subprime business, although no information regarding a potential buyer was provided. Fremont officials did not return calls seeking comment, and calls to the FDIC had not been returned by the time HW published its story.

Numerous industry sources expressed shock at the move, and said that a sale of the company’s subprime operations would not be easy, given current market conditions.

“I really don’t know what to say,” said one source, on the condition of anonymity. “Does this mean the FDIC is going to go after any institution making subprime loans with the same stance that it took on Fremont?”

Anonymous said...

It appears to be legit. Fremont account executives are e-mailing confirmation to brokers. (Broker Outpost Forum)

Cease and Desist.

I bet we'll see a flurry of guideline changes tomorrow morning.

Anonymous said...

Anybody know how many employes they had?

HBB said...

Here is a link on that

Fremont General Receives Cease & Desist From the FDIC

Fremont To Exit Subprime Lending

The shares tumbled in the After Hours Trading on Friday.

Anonymous said...

It's real. More from the memo:

Q: Do I continue to solicit loans?
A: No. As of the 3rd, we are no longer sourcing new business.

Q: Will I close what is in the pipeline?
A: This will be clarified on Monday. I would suggest to sent back all loans to the broker

Q: What do I tell the brokers?
A: Fremont Investment and loan is no longer conducting business. Any files that are pending or have been submitted will be returned to you.

Q: Will I get paid for the loans closed?
A: Yes.

Q: Does termination take effect immediately?
A: Clarification on this item will be determined on Monday.

Q: What about benefits and severance?
A: This will all be clarified on Monday or the early part of the week.

Everyone, I cannot tell you how sadly I am disappointed this industry has trended so deeply in this direction. You all have accepted me so warmly upon my arrival at Fremont and I will always cherish those relationships forever. At this point, I wish I had more information to share with all of you but I simply do not. My travel logistics are extremely complicated right now and hopefully I will have more information in the next 24 hours.

So I do not lose valuable contact with any of you, please forward to Jo Haynes your cell phone, home phone and home address. I would like to keep this information as we begin to search for alternative strategies to consider.

Anonymous said...

They had 3,200 employees, based in Santa Monica, and the insiders were dumping shares FAST last month

Director 2,384 Indirect Acquisition (Non Open Market) at $0 per share. N/A
Director 2,384 Direct Disposition (Non Open Market) at $0 per share. N/A
Director 4,810 Direct Disposition (Non Open Market) at $0 per share. N/A
Director 4,810 Indirect Acquisition (Non Open Market) at $0 per share. N/A
Officer 21,725 Direct Disposition (Non Open Market) at $16.21 per share. $352,162
Officer 35,249 Direct Disposition (Non Open Market) at $16.21 per share. $571,386
Officer 32,242 Direct Disposition (Non Open Market) at $16.21 per share. $522,642
Officer 39,223 Direct Disposition (Non Open Market) at $16.21 per share. $635,804
Officer 121,929 Direct Disposition (Non Open Market) at $16.21 per share. $1,976,469
Officer 151,164 Direct Disposition (Non Open Market) at $16.21 per share. $2,450,368
Officer 142,214 Direct Disposition (Non Open Market) at $16.21 per share. $2,305,288

Pud said...

C'mon people! Let's give these guys a break. They had a vision for something great and they tried their best to make it happen. Not every business succeeds, in fact many fail. They had the guts, the vision and the nerve to be great.

GreedKills said...

You know what really sucks.

I'm gonna have to get up early tomorrow in order to watch the market crash.

Anonymous said...

Fremont was a great company, they were an industry innovator in "creative subprime lending" and the owners go very rich.

It's a shame that most of thier customers will soon be bankrupt while the owners at Fremont return to Hawaii to regroup and ponder have difficult things are for them.

borkafatty said...

Confessions of a SubPrime Casualty…

This post is the first in a series covering my days as an Account Executive at New Century Mortgage. It also includes some preceding events relative to the story line.

I began this post by jotting down some notes. As I began to write, I couldn’t believe what I was putting down on paper. Fraud rings, FBI investigations, abusive brokers, rampant sexual harrassment and favoritism, and way too many other bad memories to list in this first paragraph........

Anonymous said...

What happens to the puts purchased on FMT?

Will the bears still be able to make a fat profit or they are now worthless?

Anybody knows?

Anonymous said...

The subprime implosion continues. Just wait until the larger banks like Wells, Chase, and BofA start getting nailed as well.

Keeping Powder Dry said...

For those that know a lil' bit about the lead-up to the great depresssion, wasn't it a rather sudden shift to illiquidity in the markets that tipped the bucket over?

This seems to me laying out something very very simliar. The sudden closing of the trap door, like this posting states, in the case of Fremont, almost sounds like a bit-by-bit replay of 1929.

Can someone with good knowledge of the 29' market meltdown offer their viewpoint in comparison?

This posting of any the previous really makes me stand up at attention and take notice... it has such an ominous sense to it.

bozonian said...

Ok, ok.

Imagine this. Goldman Sachs was a primary enabler of this and other sub prime lenders.

The Treasury Secretary of the U.S. was the CEO of Goldman while this bubble was being formed.

If Goldman tanks starting Monday, which I think it will, and lawsuits start flying and Goldman Sachs has to open its books of the last 5 years.

The ramifications of this and of the other big banks taking huge (possibly fatal) losses are extraordinary.

What will be the conflict of interests involved if Goldman Sachs is "bailed out"?

If a bail occurs of the big banks who is going to pay off the debts they owe and the mortgage insurance they owe?

Are the American people going to sit around while corporate executives who got paid 200 million in bonuses get bailed out by taxpayers while the middle class is being evicted from their homes?

Oh no you don't.

Say goodbye to capitalism. That's now for places like Russia and China.

Bud said...

Cheaters never prosper!

Anonymous said...

Does this mean the stock is going to 0?

Anonymous said...

the issue no one seems to mention - fremont has $8-9
Billion in fdic insured accounts - I would assume a lot of that is checking/demand type accounts... If I were a depositor, I would be camping out to be first in line cause this almost guarantees a run on those deposits... anyone hearing anything??? any
TV coverage???

Veronica Lodge said...

... Fremont General received notice from the FDIC that they are not permitting any more loans to be funded by Fremont... The suddenness of the change and the shift from our communication literally less then 24 hours previously simply perplexes me.

My goodness. It does indeed appear that disastrous events can happen literally overnight.

Panicky stockholders might begin salivating like Pavlov's dogs when they hear the opening bell of the stock exchange Monday morning. A selling frenzy could very well take place.

Only this time, there may be no dead cat bounce.

subprime is dead said...

More subslime lenders going out of business. Nothing like the smell of napalm before the market opens.

Anonymous said...

Stocks markets over seas,Japan and Australia are down again tonite.Investers in the USA get ready for a bad day on Monday.HPers get out of all stocks if you have them NOW!!!!!!!!!!!!

Thomas said...

It's Legit, Brian is Legit. The subject is Legit. I don't work for them but I know they are in two buildings, Tampa 1 and Tampa 2. Only an insider could make this up IF it was made up.

biff the reic loser said...

How many Biffs are being laid off? Will Chad be affected by this?

Subslime loans are gone and so too will be the jobs for Biff and Chad. They can go back to the carwash. The best thing is they don't have to pay those $1000 McMansion utility bills anymore.

Anonymous said...

I knew this was coming and tried to post it - but some of my posts we not allowed. I think Keith must be working for the banks after all.

Anonymous said...


Anonymous said...

RE: "The insider dumping of stocks!" These are the same criminals that took down Fremont Insurance 4-5 years ago with NO criminal prosecution.

They deserve to be stripped of all assets and banished to live in one of the trashy, worthless, foreclosed, stucco dumps on which they provided mortgages.

Sofia said...

Jerry Casanova?

Now that is a cool sounding name, kinda like Tom Cruise or Paris Hilton.

Anonymous said...

"However, this simply validates the volatility on our business."

Leaving aside that you probably meant
"in our business", no, it doesn't. "The suddenness of the change" only proves that you and the company you work for are stupid, dishonest, or both.

Anonymous said...

"They had the guts, the vision and the nerve to be great."

Dude, put down your bag of glue and step away from the keyboard.

Agent #777 said...

Casey, so now you have started posting as "Pud"?

Anonymous said...

US economy suddenly appears vulnerable
by Rob Lever
Sun Mar 4, 5:39 PM ET;_ylt=AtMpF0Z4YfYo.pqUYQBTbBGyBhIF

WASHINGTON (AFP) - The US economic expansion suddenly seems more fragile than thought just weeks earlier, after a sharp downward revision to the past quarter's growth and renewed fears about the slump in real estate.


The latest revision to US gross domestic product ( GDP) showed the world's largest economy expanded at a tepid 2.2 percent pace in the fourth quarter, instead of the 3.5 percent growth spurt in the official estimate a month earlier.

That was the sharpest downward revision in a decade, and was attributed to weak business spending and a drawdown of inventories from cautious firms.

Still, most forecasters say the economy will muddle through 2007 at a sluggish pace, in line with Federal Reserve forecasts.

But some say the picture is more shaky than it appeared a few weeks ago. And many are renewing forecasts for interest rate cuts by the Federal Reserve sometime this year to help pick up the pace of economic activity.

Manufacturing has been sluggish, highlighted by the 7.8 percent drop in durable goods orders last month.

And some say the US has yet to see the full effect of the housing downturn, reflected in the 19.1 percent slide in residential investment in the fourth quarter.

The end of the real estate boom has resulted in high failure rates among risky or "subprime" mortgages, given to borrowers with below-average credit ratings, and some say this crisis could spill over.

"We are seeing cracks in this easy-money-now-not-so-easy environment," said Andrew Busch, analyst at BMO Nesbitt Burns.

He said 20 subprime lenders "have either shut down or been forced to shut down" and more failures are expected. While most major banks are not in the sector, a wave of failures could spread throughout the financial system, some warn.

Stephen Gallagher, economist at Societe Generale in New York, said the sub-prime lending pullback "is a mini crisis that raises questions about complacency in general."

"It has become a case of extreme illiquidity that tends to shake out weaker hands," he said.

Another concern is the rise in the Japanese yen, which could hurt the so-called "carry trade" that provides liquidity to the US and other markets.

These concerns have whipsawed global equity markets, which saw one of the worst weeks in years, sparked by a nine percent plunge in Shanghai's stock market on Tuesday.

"Hedge funds borrow yen at very low interest rates to fund US investments. When the yen strengthens, it makes the repayment of those loans more expensive," said Dick Green, analyst at

"So, perhaps a rising yen will force some hedge funds to sell stocks to cover exchange rate losses. Perhaps."

Paul Sherard, economist at Lehman Brothers, said there may be some economic turmoil ahead but he sees no major crisis.

"Wobbly markets probably do not presage serious economic trouble ahead," he said in a note to clients.

"However, the global economy is still sitting uncomfortably in a configuration of ultimately unsustainable imbalances centered on a current account deficit of 6.6 percent of GDP in the US (2006) and current account surpluses of 9.1 percent in China and 3.9 percent in Japan."

Sherard said he expects "a gradual but generally orderly unwinding of these imbalances with occasional but inevitable bumps. But the market can be forgiven for getting occasional jitters that a faster and more painful path of adjustment may lie just ahead."

Federal Reserve chief Ben Bernanke told lawmakers Wednesday there was "no material change in our expectations for the US economy" since the official forecast delivered February 14, calling for growth a range of 2.5 to 3.0 percent for 2007.

Bernanke said the downward revision of the fourth quarter GDP numbers "was actually more consistent with our overall view of the economy than were the original numbers."

"So we expect moderate growth going forward," he added.

The possibility of a recession, evoked over the past week by former Fed chairman Alan Greenspan, has few followers. Among them, New York University economist Nouriel Roubini, who has been calling for a "hard landing" since last year.

"This hard landing will certainly be, at a minumum, a painful growth recession and, much more likely, a much more ugly outright recession," he said.

Others say the Bernanke view is more likely, saying consumer spending and other segments of the economy are holding up.

"If the US economy is sliding into recession .. someone forgot to tell the American consumer. Consumers, who account for 70 percent of economic activity, are still frolicking on the beach oblivious to the swirling storm clouds overhead," said Sal Guatieri of BMO Financial Group.

Nariman Behravesh, chief economist at the research firm Global Insight, said excluding inventory adjustments and other temporary factors, "you're looking at growth of around 2.5 percent and we think that may strengthen to about three percent by the end of the year."

He said this situation could mean rate cuts ahead if inflation stays in check, despite the hawkish rhetoric from the central bank.

"Our view is there is still chance that in the middle of the year, with the economy still sluggish, the Fed may cut once or twice. But I'm not going to make a huge bet on that."

Pete said...

>>>The suddenness of the change and the shift from our communication literally less then 24 hours previously simply perplexes me. <<<

LOL LOL LOL You REALLY don't know why the feds shut you down???? Have you read the papers lately? You were shut down b/c the mother of all margin calls is about to rain down on the stock market as your bogus Collaterized Debt that you sold experinces a good old-fashioned run-on-the-bank.

Better late than never, I guess.

Anonymous said...

Hopefully this will free up the 405 a little. Whew!

Anonymous said...

margin calls being made - sell if you can - there might be another "computer hickup".

Anonymous said...

It's troubling to know that this major corp just closed down overnight. But at the same time they deserve whats happening. I worked for this division and what "borkafatty" posted in that link is true. There was lots of fraud, harrasment, discrimination, cover-ups and other funny business going on with the brokers. I worked there for years but refused to "bonu$" inside staff or party with anyone. Needless to say, my production wasn't stellar and getting an exception on a loan was like pulling teeth. What goes around comes around.....

Anonymous said...

A good mutual fund is symbol BEARX

Anonymous said...

>>>The suddenness of the change and the shift from our communication literally less then 24 hours previously simply perplexes me. <<<

LOL LOL LOL You REALLY don't know why the feds shut you down???? Have you read the papers lately

Actually there probably was something secret behind the scenes.

As in Goldman, JPM and Citi calling up the FDIC and saying "We want our Money Back Now".

Anonymous said...
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