Fremont Receives Default Notices on its Mortgages

Fremont General Corp. said today that it received default notices on about $3.15 billion of loans it sold in March 2007. The Brea, Calif-based bank has received notices from two investors who bought the mortgages, which said Fremont violated sales terms when its tangible net worth dipped to less than $250 million. The mortgage firm expects its tangible net worth will be below $250 million when it reports 4Q07 financial results. The company said it might need to record write-downs and add to reserves for the quarter, which will further reducing its net worth. Both Moody's Investors Service and Standard & Poor's cut their ratings on Fremont as a result of a deferred dividend as well as weak liquidity. Moody's cut its rating to 'Ca' from 'Caa3' and S&P cut Fremont General to 'CCC-' from 'CCC+.'