Boca Raton Real Estate Talk

FBR Subprime Unit to File for Bankruptcy

FBR Subprime Unit to File for Bankruptcy

By Zachary A. Goldfarb

Washington Post Staff Writer
Saturday, January 12, 2008; Page D01

The Arlington investment firm Friedman, Billings, Ramsey Group said that its subprime mortgage subsidiary would file for bankruptcy protection and that it was likely to lose all of its investment in the firm, another blow to a company that already has been battered by the meltdown in the industry.

First NLC "will liquidate its assets as a result of the continued deterioration of the non-prime market," a statement by FBR Group said.

FBR made a $550 million bet on the subprime market in 2005. Much of that investment has been lost.

FBR bought First NLC, a mortgage originator in Florida, in the winter of 2005 for $101 million. At the time, FBR's profit was surging, partly because of investments in subprime mortgages.

But when the subprime market collapsed last summer, FBR announced it would restructure First NLC. Sun Capital Partners, a firm in Boca Raton, Fla., invested $60 million in First NLC while FBR invested $12 million. Had the deal closed, Sun Capital would own 80 percent of First NLC, while FBR would own 20 percent.

But yesterday FBR said the agreement to restructure First NLC would not close and the subsidiary would never officially be sold. The companies have already invested the money, however, and FBR said it did not expect to recover its $12 million. Sun Capital Partners could not be reached after business hours to comment on whether it expected to lose its investment.

FBR Group, structured as a real estate investment trust, invests in mortgage securities and other assets. It is also the majority owner of FBR Capital Markets, an investment bank and a separate public company.

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