Fremont Exits Subprimes for Condos

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Former subprime lender Fremont General Corp. is banking on condos.


The Santa Monica, Calif., financial-services holding company, which ceased making subprime loans in March, recently sold off its entire $7 billion of residential mortgages at a loss of several hundred million dollars. Now, the bank is turning to what seems like the relative safety of its remaining, commercial lending business. Trouble is, most of its commercial loans are in another squishy real-estate market: condominiums, the Wall Street Journal reports.


The bank holds around $6 billion of construction loans, with more than half of them to developers of new condos or condo conversions. And like the subprime market before it, Fremont has seen a notable uptick in delinquencies among those construction loans.


Fremont has lent its name to several high-profile condo projects in the U.S. In New York, Fremont lent $247 million to hotelier Andr & #233; Balasz’s trendy, yet-to-be built William Beaver House high-rise in lower Manhattan. It lent PMK Development LLC $153.5 million to build a 39-story tower in Honolulu which will have 394 units. It lent $77.6 million to a luxury project in South Beach, Fla., that hopes to sell units for an average or $1,447 a square foot, among the highest prices in the country for a condominium.


It has also been a major lender to condominium conversions in places such as Florida, Arizona and Nevada. All three of those condo markets have seen demand evaporate and projects stall. Fremont has been forced to begin foreclosure proceedings on at least two St. Petersburg, Fla., condo-conversion projects.


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