Industry News

FDIC finds Fremont I&L’s underwriting policies inadequate

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Fremont General Corp.'s attempts to exit subprime mortgage lending by selling its subsidiary, Fremont Investment & Loan, are being complicated by a cease-and-desist order filed by federal bank regulators. Fremont General announced March 2 it would sell its Brea, Calif.-based subprime subsidiary or, failing that, exit the subprime mortgage business.  On March 7, the Federal Deposit Insurance Corp. issued a cease and desist order to Fremont Investment & Loan, alleging the bank lacked adequate underwriting criteria, and "was marketing and extending subprime mortgage loans in a way that substantially increased the likelihood of borrower default or other loss to the bank." The FDIC order gave the bank 90 days to adopt a subprime mortgage lending policy that includes qualifying future subprime loans on the basis of a borrower's ability to repay at the fully indexed rate, and providing borrowers with clear information about the benefits and risks of the products. The FDIC also g...