Connecticut Democratic Sen. Christopher Dodd will hold hearings Thursday on the troubles in the subprime mortgage lending industry.
Dodd, chairman of the Senate Banking Committee, has invited executives from five top mortgage lenders to testify, along with federal regulators and consumer advocates.
“At the very least, homeowners facing foreclosure deserve to know what factors contributed to their dire financial straits, and what steps are needed to fix this pressing problem,” Dodd said in a press release.
Lenders invited to participate were HSBC, New Century Mortgage Corp., Countrywide Home Loans, WMC Mortgage and First Franklin Mortgage.
Layoffs at Fremont General
Meanwhile, Santa Monica, Calif.-based Fremont General Corp. will reportedly lay off a significant number of the 2,400 employees at Fremont Investment & Loan by May 18 if it can’t sell the lender.
Fremont General’s attempts to sell its home lending division have been complicated by a March 7 cease-and-desist order from the Federal Deposit Insurance Corp.
The FDIC said Fremont I&L lacked adequate underwriting criteria, and 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.
Credit Suisse Securities, which has been retained to assist in the sale of Fremont I&L, has extended a $1 billion line of credit. The bank is considering other proposals for additional credit if its $1.3 billion in cash and short-term investments are not sufficient to allow it “to exit the subprime residential loan origination in an orderly and disciplined way,” Fremont General said in a March 16 filing with the Securities and Exchange Commission.
Fremont General “has entered into discussions with various parties regarding the sale or other disposition of its residential loan origination business,” the filing said, but there are no guarantees it will pull the sale off. The same day, Fremont I&L Chief Executive Officer Kyle Walker told employees in a conference call that they could face layoffs if the sale is not completed, Bloomberg News reported.
SEC probe of subprime lending
An SEC official said Monday that the agency has launched an investigation of the subprime lending industry, but did not provide other details. The SEC, which was known to be looking into the trading of securities used to finance loans made by New Century Financial Corp., intends to “look at all the actors and their roles” in subprime lending, SEC Enforcement Director Linda Thomsen told the Associated Press Monday.
The Department of Housing and Urban Development is also preparing to take action against subprime lenders it has been investigating for alleged discriminatory lending practices, the AP said, citing comments by HUD Director Alphonso Jackson.