by Calculated Risk on 4/14/2008 09:15:00 AM

From the WSJ: Cash-Strapped Fremont to Sell Its Investment and Loan Bank

Cash-strapped mortgage lender Fremont General Corp., acceding to regulators' demands, has reached a deal to sell it investment and loan bank to a California industrial bank to be formed by CapitalSource Inc.

This is no surprise since the FDIC ordered Fremont in March to recapitalize or sell the division.

Fremont's troubles come as regulators over the past several weeks have started demanding that banks, especially small and midsize ones, get more aggressive at marking down the value of loans they are holding and that they correspondingly beef up their reserves. That is likely to force an increasing number of banks to raise fresh capital ... At the same time, as mounting defaults take a toll on banks, the FDIC and other regulators say they are bracing for more lenders to fail.

I spoke with a regional banker last week, and she told me the FDIC is definitely getting more aggressive - especially with regards to write-downs for their construction & development (C&D) and commercial real estate (CRE) loans. The coming wave of bank failures - some estimates are for 100 or more failures over the next two years - will probably be related to these C&D and CRE loans.