Shares of battered subprime mortgage lender Fremont General surged 41% to $10.00 on news iStar Financial Inc., a real estate lending and leasing company, will purchase its commercial real estate lending business for $1.9 billion and take up to a 20% stake in the remaining company. Shares of iStar rose 3.9% to $47.60, as other mortgage lender stocks also posted gains. Following the sale to iStar, retail banking will be Fremont's only remaining business. It has 22 branches in California. Gerald J. Ford, a billionaire banker and former chief of Golden State Bancorp, will lead Fremont as its new chairman, along with other executive/managerial replacements including CEO Louis Rampino, who will be succeeded by Carl Webb, also previously of Golden State. Despite the woes of subprime lenders and severe drops in their share prices, there has been broad interest in their assets among private equity and hedge funds. Shares of NovaStar Financial gained 7.0% to $6.38, Accredited Home Lenders rose 4.9% to $13.38 and IndyMac Bancorp climbed 7.1% to $35.09.
Sources: Press release [pdf], Bloomberg, MarketWatch
Commentary: Fremont General Lands Buyer for $2.9 Billion in Subprime Loans • Housing Bubble and Real Estate Market Tracker • New REIT ETFs Open Up Lucrative World of Commercial Mortgages
Stocks/ETFs to watch: Fremont General Corp. (FMT), iStar Financial Inc. (SFI). Competitors: Countrywide Financial Corp. (CFC), Accredited Home Lenders Holding Co. (LEND), NovaStar Financial Inc. (NFI), IndyMac Bancorp Inc. (IMB)
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