UPDATE: Bloomberg confirms that First Magnus has stopped funding.
Apparently First Magnus Financial has shut down funding at its retail arm, Great Southwest Mortgage, the Arizona Daily Star reports. They cite an email from the corporate office sent to branch managers informing them of the company’s decision to cease funding loans effective immediately. From the article:
An e-mail Wednesday evening told branch managers of Great Southwest Mortgage, the retail arm of First Magnus, that the parent company was no longer funding loans. First Magnus ranked 61st in the Star 200 survey of the biggest employers of Southern Arizona, reporting 800 full-time-equivalent local employees.
We will not be funding loans tomorrow, wrote Erik Lutz, the president and founder of Great Southwest. A manager with the company, who spoke on condition of anonymity, said he was told Wednesday evening that First Magnus was closing. However, he said Great Southwest hopes to stay in business by brokering loans elsewhere. All my employees were unaware until I told them, and they were pretty shocked, the manager said late Wednesday. As loan officers, were going to move on to some different companies. Were still going to stay in our field. Were going to regroup and figure out the best places to go.
However, some employees believe that First Magnus is not yet finished:
Ron Briskman, a Great Southwest branch manager in Scottsdale, said hes not convinced First Magnus is closing. It could very well be that the company goes into a Chapter 11 (bankruptcy) situation, which would give the company time to reorganize, he said.
The details are a little cloudy as First Magnus has not made an official release about their situation. In a release sent to brokers it announces a very tightened lending standard that speaks to the massive risks associated with selling loans in the secondary market. This email was sent to brokers at approximately 6 PM pacific time yesterday. However, they do not cite a cessation of funding activities.
As we’ve discussed before - banks that aren’t depositories have no control over their funding ability. They are at the whims of the market and their creditors. It’s not them that decides to stop funding; its the banks lending them the credit that decide the risk isn’t worth it and cuts them off. With no credit none of these non-depository institutions can fund loans and … poof.
Nothing has been posted to First Magnus’s web site as of this posting. We’ll keep you posted as things develop further.
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[Source: Blown Mortgage]
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