Former subprime mortgage lender Fremont General Corp. of Brea said regulators have approved the sale of its bank deposits, branches and other assets to Maryland’s CapitalSource Inc.
With the approval, Fremont General on Wednesday filed for Chapter 11 bankruptcy protection, in part to complete the sale of its banking arm to CapitalSource.
The filing allows the sale to be made without shareholder approval, something Fremont said it was unable to solicit.
The banking unit, Fremont Investment & Loan, isn’t part of the bankruptcy. It’s set to continue operating as normal and become part of newly formed CapitalSource Bank.
The sale includes a “substantial portion” of Fremont’s assets, which were about $6 billion as of March 31, as well as all of its deposits, which were $5.6 billion.
CapitalSource also bought all of Fremont’s 22 branches.
The California Department of Financial Institutions and the Federal Deposit Insurance Corp. approved the sale.
Fremont, which was once one of the nation’s largest subprime lenders, has sold assets for the past year to stem losses brought on by bad loans it made.
Earlier this month, Fremont sold its mortgage servicing rights business for $12.2 billion to Litton Loan Servicing LP, a Delaware-based affiliate of Goldman Sachs Group Inc.
In November, a group of Orange County bankers led by Chief Executive Stephen Gordon took over Fremont and moved the company’s headquarters from Santa Monica to Brea.
Gordon once ran Irvine-based Commercial Capital Bancorp Inc., which Washington Mutual Inc. bought for $1 billion in 2006.
What will become of Fremont after the bank sale and bankruptcy proceedings is unclear. The company could wind down operations.
