Académique Documents
Professionnel Documents
Culture Documents
January 2007
Forward-Looking Statement
Fremont Investment & Loan’s (the “Company”) presentation and subsequent
questions and answers may contain “forward-looking statements” pertinent to a dialogue
concerning potential investing in various public and private securities backed by residential
real estate loans originated by the Company, and which are made pursuant to the Safe
Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements may include, but are not limited to, statements regarding the Company’s level
of capital, liquidity and earnings; projected growth; anticipated levels and timing of whole
loan sales and securitizations; the Company’s outlook on the competitive and regulatory
environments; the Company’s cost of loan origination; the Company’s future loan
performance and level of early payment defaults and loan repurchases/re-pricings; the
Company’s intended loan disposition strategy and the impact upon the Company from
interest rate volatility and the level of interest rates generally, general political and
economic conditions, the sustainability of loan origination volumes, the availability of
funding for the origination of mortgage loans and the ability of the Company to sell or
securitize its mortgage loans.
Such forward-looking statements are based on the Company’s current expectations and
beliefs concerning future developments and their potential effects on the Company and are
subject to a number of factors and uncertainties which could cause actual results to differ
materially from those included in the forward-looking statements. Some of these factors
and uncertainties are described in the periodic reports filed by Fremont General
Corporation (NYSE:FMT) with the SEC. These statements, and the Company’s historical
results, are not guarantees of future performance and there can be no assurance that
actual developments will be those anticipated or currently reported by the Company.
2
Fremont General Corporation
Corporate Overview
3
Fremont General Corporation
CORPORATE ORGANIZATION
Fremont General
Corporation
(NYSE:FMT)
Fremont General
Credit Corporation
4
Well-Positioned
• While some aspects of the current non-prime residential real
estate lending market are challenging, we believe that we
have positioned the Company well:
6
Fremont Investment & Loan
• State-chartered Industrial Bank
• FDIC regulated with FDIC-insured deposits
• Total Risk-Based Capital of $1.76 billion
• We have abundant liquidity with multiple diversified sources of stable funding and
are not constrained in our funding capacity:
– Retail Deposits
– Brokered Deposits
– Federal Home Loan Bank
– Federal Reserve line
– Warehouse Lines of Credit
– Securitization
• Our Bank franchise gives us a cost of funds advantage over many others in our
industry
• Our net cost of origination is one of the lowest among non-prime originators
7
The Making of a Great Company
Fremont Investment & Loan (1937-2006)
8
Enterprise Oversight
External: FDIC, DFI, Grant Thornton, Rating Agencies, FHLB,
Warehouse Lenders and Whole Loan / Securitization transactional
due diligence
9
Overview of Business Lines (All amounts in US Dollars)
Fremont
Investment & Loan
RRE Loan
Residential Commercial Retail
Administration
Real Estate (RRE) Real Estate Banking
and Servicing
11
Residential Real Estate
Nationwide Presence
• Residential employs over 1,980 production staff including approximately 720 Account
Executives and approximately 1,260 operations and management staff
• Top 5 states of loan production (3Q – 2006): 27% CA, 14% FL, 11% NY, 8% MD, 5% NJ
Concord, CA
Elmsford, NY
Ontario, CA Northwest
Anaheim, CA Midwest
Southwest
Southeast
Northeast
Irving, TX
Tampa, FL
12
Residential Real Estate
($ in millions) Loan Origination Volumes
(All amounts in US Dollars)
$36,242
$40,000
$35,000 $3,157
$30,000 $25,838
$23,911
$25,000 $2,113
$1,404
$20,000 $13,740
$33,085
$15,000 $627
$6,935 $22,507 $23,725
$10,000
$3,333 $342
$13,113
$5,000 $53
$6,593
$3,280
$0
2001 2002 2003 2004 2005 YTD Sep
2006
2006
Rank Lender Wholesale Mkt. Share Total Orig % of Total
1 Wells Fargo Home Mortgage, IA $52,758.6 12.8% $66,783.0 79.0%
2 New Century Financial, CA $38,700.0 9.4% $39,400.0 98.2%
3 Fremont General Corp., CA $25,838.2 6.2% $25,838.2 100.0%
4 Option One Mortgage, CA $23,064.0 5.6% $24,430.9 94.4%
5 Washington Mutual, WA $21,490.0 5.2% $21,490.0 100.0%
6 Countrywide Financial, CA $19,220.0 4.6% $30,545.0 62.9%
7 HSBC Mortgage Services, IL $18,370.0 4.4% $18,570.0 98.9%
8 First Franklin Financial Corp, CA $18,010.2 4.4% $19,559.8 92.1%
9 Ameriquest Mortgage, CA $16,824.0 4.1% $24,000.0 70.1%
10 Residential Funding Corp., MN $16,670.0 4.0% $16,670.0 100.0%
11 BNC Mortgage/Finance America, C $15,375.0 3.7% $15,375.0 100.0%
12 CitiMortgage, NY $12,220.0 3.0% $24,440.0 50.0%
13 Decision One, IL $11,740.0 2.9% $11,740.0 100.0%
14 Accredited Home Lenders, CA $9,815.1 2.4% $11,243.0 87.3%
15 Ownit Mortgage Solutions, CA $8,348.0 2.0% $8,348.3 100.0%
Notes: Ranking of top mortgage originators is derived from surveys completed by lenders that supply information for inside B&C
Lending's top subprime originator ranking and from publicly available data. Estimates are in italics.
Source: Inside B&C Lending, Copyright 2006
14
Residential Real Estate
Strategies
15
Fremont Investment & Loan
Capital and Liquidity Capacity – 9/30/06
$6.73 Billion of
untapped $3.00 Billion in Warehouse Lines Availability
financing
availability (before
increasing retail
and broker $3.73
$3.73 Billion
Billion –– FHLB
FHLB Financing
Financing Availability
Availability
deposits)
$17.5 Billion
$1.23 Billion – FHLB Advances in total loan
and funding
$1.26 Billion – Brokered Deposits capacity
16
Residential Real Estate
DISPOSITION
ORIGINATIONS FUNDING OPTIONS
Loans Held
as Portfolio
17
Residential Real Estate
Loan Origination Cost
(All amounts in US Dollars)
2.50% 2.19%
2.06% 2.03% 2.07%
2.00%
1.61%
0.80%
0.74% 0.76%
1.50% 1.03% 1.24%
0.38%
1.00% 0.41%
0.00%
2001 2002 2003 2004 2005 YTD
September
2006
Direct Indirect
The first half of 2006 MBA/Stratmor peer group data shows FIL’s NCTO as 138bps vs. a peer group weighted average of 182bps. Cost information
above does not include an adjustment for net warehouse interest.
The cost to originate is for the loans sold during the period indicated and includes both direct (net of origination points and fees) and indirect costs.
There is no directly comparable GAAP financial measure for the indirect costs to originate. See Fremont General’s Form 10-Qs and 10-Ks for further
explanation and use of this measure.
18
Residential Real Estate
($ in millions) Whole Loan Sales & Securitizations
(All amounts in US Dollars)
$40,000 $35,977
$35,000
18%
$30,000 $25,306
$22,507
$25,000
16%
13%
$20,000
$11,088 82%
$15,000
11%
$10,000 $5,690 84%
87%
$2,823
$5,000 89%
100%
100%
$0
2001 2002 2003 2004 2005 YTD
September
2006
Collateral Trends
20
Residential Real Estate
Production Profile – 3rd Quarter 2006
First Mortgages Only
Volume (in Millions) Average Loan Size $272,637
ARM
ARM / Fixed
21
Residential Real Estate
Loan Production Distribution (1st Trust Deeds Only) – 3rd Quarter 2006
0%
0% 500 - 549 550 - 569 570 - 599 600 - 619 620 - 649 650 and Above
60 % and Below 60% to 70% 70% to 80% 80% to 90% 90% to 100%
62.3%
70%
60%
50% 36.6%
40%
30%
20%
1.1%
10%
0%
Refinance Term/Rate Refinance Cash Out Purchase
22
Residential Real Estate
Production Profile (1st Trust Deeds Only) – 3rd Quarter 2006
A+ $5,352 73.6%
A 788 10.8% "B"
5.3%
A- 378 5.2%
B 389 5.3% "C"
4.7%
C 237 3.3%
"D"
C- 106 1.4% 0.4%
D 27 0.4%
$7,277
23
Residential Real Estate
Loan Origination Profile 2006: Recent Trends
• Continued reduction in % of 2nd lien product of total volume - with lower CLTV:
2nd Lien % Total CLTV %
• Jan - June 9.0% 88.3%
• July - Sept 6.2% 86.2%
• Further increase in FICO Score for 1st lien and 2nd lien and selective increase in
minimum FICO floors:
1st TDs 2nd TDs
• Jan - June 621 653
• July - Sept 627 664
24
Residential Real Estate
25
Where Quality Intersects Mortgage Banking
SALES PRODUCTION LOAN ADMINISTRATION FINANCE CAPITAL MARKETS
UW AM AR Funder QC
Broker Servicing
Development
EP
D
Pricing
E
AS
H
C
R
FEEDBACK LOOP
U
EP
R
BCM
Due Diligence Credit Risk
Product
Development
QUALITY FOUNDATION
Fraud Limit Investor EPD/FPD Call Credit Scoring Risk-Based Pricing
Know the Broker F-Score Pre & Post Funding QC
Technology Authorities Kicks Groups Models Best Execution
Enhance BCM Policy - New Credit Officer ACES
CRMS
Eliminate Riskiest
Job Performance Metrics
Products
Financial Performance
Skills Assessment, Training & Certification
26
Residential Real Estate
Process Changes - Underwriter Training
• Two levels of fraud training introduced to the field in 2006:
27
Residential Real Estate
Recent Changes and Enhancements
• 80/20 Program - Elimination of credit scores <600 Full Doc and < 640 Stated
Doc. Effective January 8, 2007, elimination of >95% LTV/CLTV that are
purchase money and stated income
• New policy on verifying CPA and reference letters. Effective January 8, 2007,
will not accept reference letters for stated income and self-employed
28
Residential Real Estate
Recent Changes and Enhancements (continued)
29
Residential Real Estate
Quality Enhancement
30
Residential Real Estate
Appraisal / Appraisal Review
• Accept original full URAR appraisals only with color photos
• Geographic specific AVM run on every property including History Pro from Core Logic,
a C&S Company
• Approximately 20% of the reviews had a value reduction from the appraisal department for
October 2006 and an additional 3% of appraisals were rejected
31
Residential Real Estate
Appraisal / Appraisal Review - Recent Enhancements
• Require Regional Operations Manager approval on properties
seasoned <6 months
33
FPD Effect to *Guideline Changes
2006 Underwriter Tightening Changes
(FPD at 30 days from payment due date)
7.0%
6.0%
5.82%
5.51%
5.33%
5.0%
4.52%
4.76%
3.75% 4.20%
4.0% 3.85%
3.92% 3.81%
3.19% 3.32% 3.11%
3.22% 3.34% 3.05%
2.87% 3.08% 3.04%
3.0% 2.96%
2.61% 2.94%
2.38% 2.57% 2.66%
2.64%
2.07% 2.22% 2.54%
2.0% 1.83% 1.89% 1.96% 2.27%
1.71% 2.03%
1.41% 1.58% 1.71% 1.65%
1.34% 1.33%
1.18%
1.0% 0.98%
0.76%
0.0%
01
02
03
04
05
06
07
08
09
10
11
12
01
02
03
04
05
06
07
08
09
10
05
05
05
05
05
05
05
05
05
05
05
05
06
06
06
06
06
06
06
06
06
06
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
% of Boarded Production
o FPD's are reflected at the boarded month rather than the month the first payment was due.
34
FPD Effect
2006 Underwriter Tightening Changes
Combo Loans
(FPD at 30 days from payment due date)
7.0%
6.0%
5.51% 5.82%
5.33%
5.0%
4.52% 4.69% 4.57% 4.76%
4.23%
4.0% 3.75%
3.91% 3.81%
4.02%
3.22% 3.32% 3.11%
3.35%
2.87% 2.94% 3.19% 3.47% 3.05%
3.0% 3.04%
2.61% 2.96% 2.72%
2.38% 2.64% 2.64% 3.04%
2.59% 3.01%
2.07% 2.45%
2.16% 2.26%
1.83% 2.40% 2.29%
2.0% 1.95%
1.77%
1.41% 1.62%
1.46%
1.15%
1.0%
0.0%
09
10
01
02
03
04
05
06
07
08
09
10
11
12
01
02
03
04
05
06
07
08
05
05
05
05
05
05
05
05
05
05
05
05
06
06
06
06
06
06
06
06
06
06
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
FPD Actual Monthly Rates FPD with Guideline Changes in Place
o Combos that fall into the category of the UWG tightening changes is approx. 12% of which FTHB Combos account for approx 5%.
o FPD's are reflected at the boarded month rather than the month the first payment was due.
35
First Time Home Buyer Production
As a Percent of Total Monthly Production
30.00%
25.58%
25.00% 25.63%
23.59%
23.50%
20.00% 20.55% 20.21%
19.49%
15.00%
12.96%
10.00%
8.66%
5.00% 5.63%
2.77%
3.80%
2.38%
0.00%
1
2
/0
/0
/0
/0
/0
/0
/0
/0
/0
/1
/1
/1
/0
/0
/0
/0
/0
/0
/0
/0
/0
/1
/1
/1
05
05
05
05
05
05
05
05
05
05
05
05
06
06
06
06
06
06
06
06
06
06
06
06
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
o This chart reflects the underwriting tightening of FTHB in late May 2006
36
Production Effect
2006 Underwriter Tightening Changes - Effect on Production
In $ Millions
$4,000 50.00%
45.00%
$3,500
40.00%
$3,000
35.00%
$2,500
30.00%
$2,000 25.00%
19.95%19.73%
18.31% 20.00%
$1,500 16.25% 19.84% 16.64%
16.93%
16.57%16.16% 16.31% 17.46% 16.19% 14.86%
15.16% 14.40% 15.00%
14.56% 14.08%
$1,000
12.11% 10.00%
$500
5.00%
1.91%
0.08%
$- 0.00%
01
02
03
04
05
06
07
08
09
10
11
12
01
02
03
04
05
06
07
08
05
05
05
05
05
05
05
05
05
05
05
05
06
06
06
06
06
06
06
06
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
Production Total UWG Change Total Percent Effect to Production
37
Residential Real Estate
Servicing
38
Residential Real Estate
David Gordon
SVP, Loan Administration
& Servicing
39 REO
Residential Real Estate
Non-Prime Loan Servicing
• No offshore operations
40
Residential Real Estate
Loan Servicing Vision
• We work with the borrower utilizing creative and flexible solutions for
homeownership preservation. We then make every effort to resolve a
default situation, so as to minimize any potential losses and maximize the
return on investment
41
Residential Real Estate
Loan Servicing Philosophy
• Customer Education
• Customer Partnership
• Customer Solutions
42
Residential Real Estate
Loan Servicing Strategic Advantages
• Management tenure/expertise
• Captive Originator
43
Residential Real Estate
Loan Servicing Strategies
• Default Management strives to reduce loss severity through
timeline control, fees and costs management and identifying
better execution of exit strategies
44
Residential Real Estate
Servicing Volume/Servicing Units/Employees
(All amounts in US Dollars)
UNITS EMPLOYEES
$24.9 B $24.3 B 500
120,000
$22.3 B $23.2 B
450
121,000
113,100
100,000 114,700 400
$15.0 B
350
80,000
113,900 300
Servicing
Units
0 0
YE 2002 YE 2003 YE 2004 YE 2005 Mar-06 Jun-06 Sep-06
45
Residential Real Estate
Unique Right Party Contacts % of 1st Liens Boarded
November 2006
"Better-Same-Worse" Analysis
05/31/06 - 10/31/06
Started Started 30-Days Started 60-Days
Current Delinquent Delinquent
Ended Ended Ended Ended Ended
Worse Better Worse Better Worse
47
Residential Real Estate
90+ Day Static Pool Performance Analysis
Status as of 09/30/06
Total
Cure
Total Cash Cash
Loan Type Cure Flowing Flow
48
Residential Real Estate
Top Ten States with Active REO’s
November 2006
FL
GA
5%
14%
Other IL
24% 5%
MA
7%
MI
13%
CA
13% MN
VA TX MO 5%
5% 5% 4%
CA Other FL GA IL MA MI MN MO TX VA
49
Residential Real Estate
Loss Severity
November 2006
-$6,000,000.00 -50.00%
-45.00%
-$5,000,000.00
-40.00%
-35.00%
-$4,000,000.00
-30.00%
-$3,000,000.00 -25.00%
-20.00%
-$2,000,000.00
-15.00%
-10.00%
-$1,000,000.00
-5.00%
$0.00 0.00%
Q3 2001
Q4 2001
Q1 2002
Q2 2002
Q3 2002
Q4 2002
Q1 2003
Q2 2003
Q3 2003
Q4 2003
Q1 2004
Q2 2004
Q3 2004
Q4 2004
Q1 2005
Q2 2005
Q3 2005
Q4 2005
2001 2002 2003 2004 2005
180
160
140
120
DAYS
100
80
60
40
20
0
Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06
Avg Days Listed Avg Days In REO Avg Days Post Eviction To Liquidation
51
Residential Real Estate
Loan Servicing Early Collections (0-30 days)
• 650 loans per collector
• Employee incentives
53
Residential Real Estate
Loan Servicing Foreclosure Tracking and Timelines
54
Residential Real Estate
Loan Servicing Bankruptcy Assignment and Tracking
• Accounts are assigned to the Bankruptcy unit upon notification
(verbal or written)
55
Residential Real Estate
Loan Servicing Technology Utilized
Our experience allows Fremont to merge process and technology and use
integrated technology to service our interim and held to maturity portfolios.
56
Residential Real Estate
57
58
59
Residential Real Estate
(1)
2004 Fremont Collateral 60+ Day Delinquency by Servicer
20.00%
16.00%
12.00%
8.00%
4.00%
0.00%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29
Age
(1) 60+ Day Delinquency is defined as the sum of 60+ Day Delinquencies, Foreclosures, REOs, & Bankruptcies as a percentage of
current outstanding principal balance.
Note: Litton serviced collateral is defined as the weighted average by current collateral balance of the following transactions: Fremont
2004-1, Fremont 2004-2, Fremont 2004-4, & ACE 2004-FM2.
Note: EMC serviced collateral is defined as the weighted average by current collateral balance of the following transactions: BSABS
2004-FR2, BSABS 2004-FR3.
Note: Fremont serviced collateral is defined as the weighted average by current collateral balance of the following transactions: Fremont
2004-A, Fremont 2004-B, Fremont 2004-C, Fremont 2004-D.
Note: HomeEq serviced collateral is comprised of the following transaction: Fremont 2004-3.
60
Residential Real Estate
(1)
2005 Fremont Collateral 60+ Day Delinquency by Servicer
16.00%
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
Age
(1) 60+ Day Delinquency is defined as the sum of 60+ Day Delinquencies, Foreclosures, REOs, & Bankruptcies as a percentage of current
outstanding principal balance.
Note: Saxon serviced collateral is defined as the the weighted average by current collateral balance of the following transactions: SABR 2005-
FR1, SABR 2005-FR2.
Note: EMC serviced collateral is comprised of the following transaction: BSABS 2005-FR1.
Note: Countrywide serviced collateral is comprised of the following transaction: SABR 2005-FR3.
Note: Litton serviced collateral is defined as the weighted average by current collateral balance of the following transactions: Fremont 2005-1,
Fremont 2005-2.
Note: Fremont serviced collateral is defined as the weighted average by current collateral balance of the following
61 transactions: Fremont 2005-A, Fremont 2005-B, Fremont 2005-C, Fremont 2005-D.
Residential Real Estate
(1)
2006 Fremont Collateral 60+ Day Delinquency by Servicer
16.00%
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
1 2 3 4 5 6 7 8 9 10 11
Age
(1) 60+ Day Delinquency is defined as the sum of 60+ Day Delinquencies, Foreclosures, REOs, & Bankruptcies as a percentage of current
outstanding principal balance.
Note: Wells Fargo serviced collateral is defined as the weighted average by current collateral balance of the following transactions: SGMS
2006-FRE1, Fremont 2006-1.
Note: JPMorgan Chase serviced collateral is comprised of the following transaction: JPMAC 2006-FRE2
Note: Equity One serviced collateral is comprised of the following transaction: NHEI 2006-FM1.
Note: Fremont serviced collateral is defined as the weighted average by current collateral balance of the following transactions: Fremont
2006-A, Fremont 2006-B, Fremont 2006-2.
62
63
Fremont General Website
www.Fremontgeneral.com
Financial Reports
Financial Highlights
Corporate Credit Ratings
ABS Investor Presentation
Regulation AB
www.Fremont-regab.com
Static Pool Performance
SERVICING
JOHN ALKIRE SR VP, LOAN ADMINISTRATION jalkire@fmtinv.com
DAVID GORDON SR VP, LOAN ADMINISTRATION & SERVICING dgordon@fmtinv.com
ORIGINATIONS
BOB CLAFFORD SR VP, SALES AND OPERATIONS rclafford@fmtinv.com