Fremont to Sell Lending Business

Shares of Fremont General soared Monday after it said it would sell its residential real estate business and about $2.9 billion in subprime residential mortgages at a loss in a move that would effectively shutter the company.

Fremont said Monday the sale, to an undisclosed buyer, is "at a discount that reflects the current conditions in the subprime mortgage market." Subprime lenders make loans to customers with spotty credit histories. More than two dozen of the companies have gone bankrupt in recent months as customer defaults have risen sharply in the midst of a prolonged slowdown on the housing market.

The company expects a pretax loss of $100 million on the sale of the loans.

Under the letter of intent to sell its assets, Fremont would part with its subprime residential loan servicing platform, a portion of its subprime loan origination platform and all of its mortgage servicing rights, servicing advances, residual interests and mortgage-backed securities.

Fremont Investment & Loan, the company's subsidiary, has approximately $1.5 billion in cash and short-term investments.

Shares of Fremont soared $1.95, or 28%, to $8.99.