Fremont General ( FMT) is selling mortgage servicing rights to a subsidiary of hedge fund manager Carrington Capital Management. The Brea, Calif.-based lender has sold mortgage servicing rights to Carrington Mortgage Services, formerly the servicing platform of collapsed subprime lender New Century Financial. An affiliate of Carrington Mortgage Services already owns the loans, Fremont said Thursday. The sale of these mortgage servicing rights to Carrington means "the collection, customer service and loss mitigation activities on the related loans that the bank currently services will transition to
Carrington upon closing," Fremont said. Carrington is not acquiring Fremont's servicing platform or any other asset. Fremont, which did not disclose how much it was selling the servicing rights for, said it will also be reimbursed over 12 months for "outstanding advances previously made by the bank up to the closing date." The deal is expected to close on April 1. Fremont, which last year consented to a cease-and-desist order from the Federal Deposit Insurance Corp. that forced it out of residential subprime lending, agreed in May 2007 to sell its commercial loan business to iStar Financial ( SFI). In conjunction with the deal, Fremont said an investor group led by Gerald Ford would take control of the company and its retail bank. But that deal fell through late last year as conditions worsened in the mortgage industry. Fremont said that the mortgage servicing rights to be sold are related to mortgage loans with total remaining principle balance of $1.9 billion. That represents "approximately 13% of the total remaining mortgage loan principal balance currently serviced by the bank," Fremont said. Carrington is an investment manager of a hedge fund focused on the subprime residential mortgage securities market. Carrington Mortgage Services acquired New Century's mortgage servicing platform last June, several months after the lender filed for bankruptcy. As of July 31 last year, Carrington Mortgage Services serviced a portfolio of nearly 90,000 loans with an outstanding principal balance of over $16 billion. Nearly 63% of the portfolio is comprised of adjustable rate product, according to Fitch Ratings.