Shares of mortgage lender Fremont General surged 33% yesterday to $9.62 after it announced it has secured a buyer for approximately $2.9 billion of its subprime mortgages. It has also signed a letter of intent with the same buyer to sell most of its residential real estate business. The discounted sale of the subprime loans will result in a pretax loss for Fremont of about $100 million. The buyer has not been identified, but some analysts speculate that it could be Fortress Investment Group LLC. Last month, Fremont was given a cease-and-desist order by the FDIC instructing it to exit the subprime mortgage business. It subsequently sold $4 billion of subprime loans to an unnamed buyer, for which it took a pretax loss of $140 million. The company will hold onto its commercial real estate business, which was profitable as of last month. Fremont has a $6.42 billion commercial loan portfolio concentrated in California, New York and Florida.
Sources: Business Week, TheStreet.com, Reuters, MoneyCentral
Commentary: Fremont Sells $4B in Loans at a 3.5% Discount, Shares Climb • Fremont General: Subprime Sale Isn't a Done Deal • Housing Double Dips Offer Short Opportunities
Stocks/ETFs to watch: Fremont General Corp. (FMT). Competitors: Bank of America Corp. (NYSE:BAC), Countrywide Financial Corp. (CFC), Accredited Home Lenders Holding Co. (LEND), New Century Financial (OTCQB:NEWC). ETFs: iShares Cohen & Steers Realty Majors (NYSEARCA:ICF), iShares Dow Jones US Real Estate (NYSEARCA:IYR), Vanguard REIT ETF (NYSEARCA:VNQ)
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