A subprime lender that was experiencing an early default rate of nearly 6 percent last summer has stopped doing business with 8,000 mortgage brokers who were “highly correlated” to the sudden rise in defaults.
Fremont Investment and Loan has reduced its early default rate to 3 percent since severing its ties to the brokers, Fremont vice president of marketing Mike Koch told a group of investors Monday, Reuters reported.
Some of the brokers may have done nothing wrong, but specialized in 80-20 loans that Fremont cut back on, Koch said. But Koch said other brokers were “pushing appraisals,” the story said.
Fremont had the highest rate of defaults on subprime loans made in 2006, according to an analysis by UBS Investment Bank.