Sub Prime Mortgages

Fremont General Corp., which shut down its sub-prime mortgage lending this month under pressure from federal regulators, said Wednesday that it had agreed to sell about $4 billion of these loans. The Santa Monica lender, which operates through a bank subsidiary, Fremont Investment & Loan, said it already had received $950 million in cash from its first loan sale and expected to complete the rest of the sales over the next several weeks.

Moody's Investors Service will change the way it rates bonds backed by second-lien sub-prime home loans, which have contributed to turmoil in mortgage markets. The new method will be published by the end of this month, Moody's said, without providing further details. U.S. investors, ratings companies and lawmakers have begun to reevaluate the way mortgage-bond risk is measured and assessed after lax lending standards led to a rise in the number of bad loans.

Foreclosures are rising. Prospective buyers with shaky credit can't get loans. And with the spring home sale season starting to blossom, buyers and sellers are trying to divine which way the market is heading. In years past, real estate agents were often the only sources people could turn to for information on the state of the market. But increasingly, bloggers are filling that role, touting themselves as independent sources in a field crowded with vested interests.

Wells Fargo & Co. is one of the biggest players in the sub-prime lending business -- but you won't find the San Francisco bank on the list of companies torpedoed by soured loans. Like other big banks and lenders, Wells Fargo's exposure to sub-prime losses is offset by its large portfolio of other loans and businesses.

With as many as 460,000 California homeowners reportedly at risk of losing homes bought with sub-prime mortgages, a top California business regulator called Monday for a ban on certain risky and controversial lending practices. At issue for Department of Corporations Commissioner Preston DuFauchard were home loans being issued without lenders fully verifying the prospective buyer's income and employment status.

Irvine lender New Century Financial Corp. proved the old adage Monday: The bigger they are, the harder they fall. New Century was once the largest independent company specializing in sub-prime mortgages for borrowers considered high credit risks. On Monday, it became the largest sub-prime lender to file for bankruptcy protection, firing 3,200 workers and saying it would aim to sell its remaining operations.

Problems in the sub-prime mortgage market have not spread but are clouding the outlook for housing and the U.S. economy as a whole, Federal Reserve Bank of Dallas President Richard Fisher said Wednesday. "Thus far, the damage from the sub-prime market has been largely contained. ... Quality problems have arisen primarily for adjustable-rate sub-prime loans, which are only about 8.5% of home-mortgage debt outstanding," he told the Austin Mortgage Bankers Assn.

Congressional Democrats, seeking to head off a surge in home foreclosures, called Wednesday for steering hundreds of millions of federal dollars to nonprofit groups to help borrowers refinance their loans. Democrats said they were still working out details of the plan but said their aim was to help borrowers who have not yet entered foreclosure. The federal money would be used to help subsidize their monthly payments or help them spread out payments over a longer time, Sen. Charles E.

Fremont General Corp., a Santa Monica-based bank that once specialized in mortgages for risky borrowers, said Monday that it had found a buyer for most of its remaining sub-prime loans and that it was negotiating the sale of its customer-service arm, which handles bill collections and foreclosures. Fremont stock jumped $1.83, or 26%, to $8.88 on the news. The shares, which had traded as high as $16.

Two big lenders stepped up Wednesday with plans to help some strapped mortgage borrowers, while a Capitol Hill summit on rising foreclosures put pressure on other industry players to work with troubled homeowners. Freddie Mac, a government-chartered company that buys mortgages from lenders, said that it wanted to encourage lenders to make "consumer-friendly" sub-prime loans and that it agreed to buy $20 billion of such new adjustable- or fixed-rate mortgages. Separately, Washington Mutual Inc.