Fremont Investment & Loan
Fremont Investment & Loan was a privately owned company with approximately 20 branches located across the coastal and Central Valley areas of Southern California. The parent company was Fremont General, a private company also based in California.
Fremont Investment & Loan was classified as an industrial bank that provided a variety of deposit products (i.e., savings and money market accounts, CDs, and IRAs). Fremont General was one of the largest subprime mortgage lenders prior to problems due to the real estate market. This company was primarily a commercial real estate lender providing loans for construction or conversion of multifamily housing (such as condominiums) which made up approximately half of its portfolio.
During the first quarter of 2007, Fremont General, the owner of Fremont Investment & Loan, announced they were running low on cash and stopped making loans. In the fourth quarter of that year, a deal for $80 million capital infusion from an investor group failed. At this point, Fremont General announced they were exploring their options which included the sale of the company.
In addition to financial problems, the company also had legal problems. A class action complaint was filed by a company retiree in Los Angeles, California federal court under the Employee Retirement Income Security Act. The class action complaint claimed the company directors sold their own shares prior to making a less than prudent investment. The class action complaint stated the company directors were aware the stock was not a prudent investment for the employee stock ownership plan and accused the company directors of dumped their own shares prior to making the investment.
In May 2007, Fremont sold their commercial real estate business to iStar Financial (NYSE:SFI), a publicly traded company with headquarters in New York City. iStar Financial deals in real estate investment trusts. When this deal was finalized, iStar Financial paid for $2 billion and took a 30% stake in Fremont’s $6.5 billion commercial loan portfolio, with Fremont retaining the remaining 70%.
In April 2008 the announcement was made that Fremont General sold Fremont Investment & Loan’s retail deposits and retail bank branches located in California to TRS Inc, a subsidiary of CapitalSource. CapitalSource (NYSE:CSE) is a publicly traded real estate investment trust with headquarters in Chevy Chase, Maryland. At the time of the sale, CapitalSource took over 22 branch bank branches and assumed $5.6 billion in deposits. With this purchase, they did not acquire Fremont General, nor did they include Fremont’s loan servicing business or their residential mortgage assets.
Fremont sold their remaining loan portfolio to Litton Loan Servicing LP (NYSE:GS), a publicly traded company based in Houston, Texas, in July, 2008. This sale included $12 billion plus worth of loans and associated servicing rights.
Fremont Investment & Loan is still in business today; however, effective July 31, 2008, the name changed to Fremont Reorganizing Corporation and is a wholly owned subsidiary of CapitalSource Bank. With this name change, the customers were assured there were no changes to their accounts. All former Fremont Investment & Branches are now branches of CapitalSource Bank.