Fremont Will Delay Earnings: Subprime's Latest Victim?
Fremont General Corporation (NYSE:FMT), one of the nation's largest subprime residential lenders, announced late Tuesday that it will postpone the release of its fourth quarter and full-year 2006 results of operations, each previously scheduled for February 28, 2007. The company also announced that it will miss the SEC deadline of March 1 to file its 2006 annual report on Form 10-K. Fremont did not give reasons for the delays in its press statement. Spokeswoman Linda Bandov, in an interview with Reuters, said Fremont will provide an update on Thursday. Santa Monica, Calif.-based Fremont General's residential lending business is one of the nation's largest in the subprime market, originating $7.8 billion in the third quarter of 2006 and servicing $24.3 billion in loans outstanding as of September 30, 2006. The company is also engaged in retail banking and commerical mortgage lending. Not the first While no official word was given on Fremont's reason for delaying its earnings release, numerous sources have told Housing Wire that they believe the company is the latest to buckle under pressure from quickly rising loan repurchases and associated borrower defaults. On February 8, New Century Financial said it would restate its consolidated results for the first three quarters of 2006 and delay its fourth quarter earnings release due to errors in the company's accounting for loan repurchases. The delay and subsequent drop in the company's stock price has placed New Century squarely in the middle of numerous class-action claims of securities fraud, and served as a precursor to a wide round of earnings losses from other large subprime lenders, including Accredited Home Lenders and NovaStar Financial Corporation. NovaStar is also the subject of similar class-action claims of securities fraud, according to an earlier report from Housing Wire. "If it's hitting New Century, Accredited and others," said one source who asked his name not be used, "why would Fremont be any different? If anything, the fact that a federally-insured thrift is at least fighting indigestion due to what appears to be a flood of repurchase claims should signal a real problem." Others were more direct in their assessment. "The debate over whether this mess in subprime would resolve itself quickly is officially over," said another industry source, "and it's pretty clear we've got a rough road ahead of us." For more information, visit http://www.fremontgeneral.com.