Blown Mortgage

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Fremont General, the parent company of the Investment and Loan that was slapped with a cease-and-desist order for its role in questionable subprime lending, was downgraded by ratings agencies and faces liquidity concerns reports Market Watch.

From the article covering Fremont’s downgrade and liquidity concerns:

Standard & Poor’s downgraded Fremont General to CCC+ from B- late Tuesday and warned that the Californian lender may not be able to meet its debt obligations. “Liquidity at the holding company has deteriorated substantially,” S&P credit analyst Adom Rosengarten said in a statement. Liquidity remains strong at the company’s banking business. But Fremont has been hit with a cease-and-desist order from regulators which restricts the bank unit from paying dividends to the holding company during the past year, the analyst noted. That’s greatly decreased liquidity levels at the parent company, he said. “We have concerns about the parent’s ability to meet its debt obligations, given our assessment of its reduced cash holdings,” Rosengarten concluded.

Fremont Investment and Loan was known as one of the most “subprime” of all the subprime lenders with underwriting guidelines that were nearly non-existent.  Their lending practices got them in to hot water with Feds back at the beginning of the crisis when they were served with an order that prohibits the bank from making mortgage loans and paying dividends to parent company choking off cash flow needed to service the existing debt of the company.

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