Subprime Florida Home Loan Lender Wokers in Professional Peril

Hundreds of Tampa employees of beleaguered subprime Florida mortgage lender Fremont Investment & Loan are on paid leave and waiting on a telephone call today to find out whether they still have a job.

Fremont is the nation’s eighth-largest subprime lender, meaning it lends money to home buyers who have poor credit. Its parent company, Santa Monica, Calif- based Fremont General Corp., said Monday it no longer is making such loans and may sell the division.

The 2,400 employees of the residential unit work in five offices nationwide, company spokesman Dan Hilley said. Hilley said he didn’t have the number of local employees affected, but Fremont has residential division offices in the West Shore Boulevard and Memorial Highway areas near the airport.

The company is expected to announce whether it will sell or liquidate the division today, Hilley said.

“Employees were told to go home on paid leave indefinitely,” Hilley said. “We’ll find out more soon.” Among the Tampa employees are Florida home loan originators, appraisers and review appraisers.

Monday’s staff announcement came after a cease-and-desist order issued last week from the Federal Deposit Insurance Corp. telling Fremont not to write any more subprime Florida home loans, according to Hilley and a statement released from Fremont.

“The FDIC obviously went in and found a lot of things they didn’t like,” said Chris Wolfe, an analyst with Fitch Ratings.

Fremont isn’t the only subprime lender in trouble now, and Wolfe said others likely will follow Fremont’s lead.

During the recent boom years of the housing market, the list of the nation’s subprime lenders grew, and now that the market is slowing, there is too much competition, Wolfe said.

“It’s like musical chairs,” he said. “Somebody’s got to go.”

Add to that the increase in Florida mortgage defaults that makes the FDIC, which regulates banks and other financial institutions, and Wall Street uneasy.

Too many subprime lenders were lax on lending requirements and too many buyers jumped into unsuitable Florida mortgage loans, Wolfe said. “The quality of loans deteriorated rapidly in 2006.”

Other Fremont divisions are commercial real estate lending and retail banking. Hilley said the company expects to keep those units.

One possibility for employees of the company’s residential division: They could find out today they still have job but now work for a new employer, Hilley said.

That may be unlikely because numerous other subprime lenders also are looking for buyers.

“I think it’s going to be difficult to find a buyer for a reasonable price,” Wolfe said. “It’s basically a distressed sale at this point. Nobody’s going to give them what it’s probably worth.”