Fremont Pressed to Raise Capital or Sell

The Federal Deposit Insurance Corp. and the California Department of Financial Institutions set a May 26 deadline for the Brea, Calif.-based company to raise capital, according to a filing with the Securities and Exchange Commission.

The FDIC considers the company's banking unit, Fremont Investment & Loan, to be undercapitalized by regulatory standards, Fremont said in the filing.

The two banking regulators issued their directive to the company on Wednesday, ordering it to sell shares or assets to raise enough capital to meet regulatory minimums, put itself up for sale and divest the bank.

The federal agency also restricted Fremont to offering interest rates at prevailing rates paid by similar banks in California.

The company was also ordered not to increase pay for executives or make any payouts to any affiliate of the bank.

Fremont said it is trying to raise capital and also exploring selling the company or the bank.

Fremont was primarily a mortgage lender until early last year, when it was forced by regulators to cease originating mortgages.

The agency claimed Fremont was operating without proper risk management oversight. The company proceeded to sell its mortgage assets after the lending operations were closed.

It has since been struggling to turn itself around following the collapse of the subprime mortgage industry.