US mortgage lender First Magnus stops selling new loans

AP, PHOENIX, Arizona

Sat, Aug 18, 2007 - Page 10

First Magnus Financial Corp, a US national mortgage lender that was on track to fund US$36 billion in loans this year, stopped originating new loans on Thursday and said it was suspending operations.

Company officials said the lender was caught in the credit liquidity crunch now causing a meltdown in the US mortgage industry, even though it was not engaged in selling subprime mortgages that sparked the crisis in recent months.

"We're not funding loans right now and we're not certain what the future holds at this juncture," said Gary Baraff, the company's senior vice president for marketing.

A bankruptcy filing was possible, Baraff said.

First Magnus, which calls itself one of the largest privately held mortgage banking operations in the US, funded more than US$30 billion in loans last year and has more than 300 offices and 5,500 employees. It had operations in all 50 states.

First Magnus originated home loans and then sold bundled loans into the secondary loan market.

The company's troubles are the latest in a series of meltdowns in the US mortgage industry which are blamed on delinquencies and other problems in the subprime lending market.

American Home Mortgage quit writing home loans on Aug. 3 and filed for bankruptcy protection three days later, blaming its troubles on margin calls from banks that had provided it with the cash necessary to write mortgages. Last week, regional mortgage lender HomeBanc Corp filed for bankruptcy protection.

Leading lender Countrywide Financial Corp said on Thursday it had borrowed US$11.5 billion from a group of 40 banks to fund loans, a move that shows just how deep the crisis has become.