Judging by the types of loans it is no longer originating, subprime lender Fremont Investment & Loan may have a house recipe sure to provide a healthy portion of early payment defaults: begin with a stated income 80/20 combo loan, mix in a purchase money home buyer with a FICO score below 640 and then bake in a low home price appreciation environment. Cooking times vary by geographic area.

While Fremont executives say they, for one, have changed their lending practices, they, and the secondary market, are now beginning to deal with the aftermath of what appears to be an industry-wide problem with 2006 subprime loans. Four home equity ABS securitizations backed by the Santa Monica, Calif.-based lender's loans have piled up on rating agency watch lists in recent weeks - two issued just this year and two from 2005.

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