Loan Sale Lifts Fremont

The news ignites another relief rally in the subprime sector.
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Fremont General

(FMT)

is selling $4 billion of its subprime loans.

Shares of the Santa Monica, Calif., lender surged 12% early Wednesday on the news. Fremont said last month that it would exit the subprime business after it consented to a cease-and-desist order from the Federal Deposit Insurance Corporation. It did not say who was buying the loans.

Fremont said it has received $950 million in cash from the first sale installment. It anticipates the remaining sales to be completed in the next few weeks, the company said in a release.

As a result of the sale, the company expects a pretax loss of $140 million reflecting the sale of the loans at a discount, it said.

News comes a day after

Accredited Home Lenders

(LEND) - Get Report

scored a $200 million term loan commitment from hedge fund Farallon Capital Management of San Francisco. Accredited is selling $2.7 billion worth of loans held for sale to an unnamed buyer so it can meet margin calls.

Fremont said its commercial real estate lending arm, residential loan servicing operations and retail bank are still continuing to run.

During earnings calls last week, big brokerages including

Goldman Sachs

(GS) - Get Report

,

Bear Stearns

(BSC)

and

Lehman

(LEH)

said they would be interested in picking up subprime loans on the cheap.

Shares of other distressed lenders were also rising in early market trading.

NovaStar's

(NFI)

stock rose 36 cents, or 6%, to $6.20. Accredited's stock was up 32 cents, or 3%, to $11.09.