First Magnus - Alt A

Many have forwarded on to us an emailed announcement from First Magnus that appears to have been sent late yesterday evening that indicates they have ceased funding loans:

IMPORTANT NOTICE:

FIRST MAGNUS IS NO LONGER FUNDING ANY MORTGAGE LOANS

In light of the collapse of the secondary mortgage market, First Magnus will not fund any future mortgage loans, and is no longer accepting any mortgage loan applications or funding any mortgage loans previously originated and not yet funded. We explored all options before taking this action but were left with no viable alternative.

First Magnus values the relationships we have formed with all of our broker partners over the years and appreciate the trust you have shown in us. We are saddened that we will no longer have the opportunity to work with you.

For information about loans already submitted to First Magnus, please call 520.618.9000.

The Arizona Daily Star has reported on the closure here:

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, we're going to move on to some different companies. We're still going to stay in our field. We're going to regroup and figure out the best places to go."

Ron Briskman, a Great Southwest branch manager in Scottsdale, said he's 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.

...

"Nearly all the people that I care about in this world have relied on this great company to raise their families and grow professionally," Lutz wrote. "While many of the questions that you will have I cannot answer tonight, I wanted to give each of you some time to call your people before that notice goes out."

First Magnus was founded in July 1996 by Tom Sullivan Sr., Tom Sullivan Jr. and G.S. Jaggi. The elder Sullivan helped start Title Security Agency of Arizona in the early 1970s and provided initial funding for First Magnus.

None of the three could be reached for comment late Wednesday.

Headquartered at 603 N. Wilmot Road, First Magnus has described itself as "one of the largest privately held mortgage banking operations" in the country, lending in all 50 states.

Update, Aug 18: The second article above points out that 6,000 people have been laid off, and a bankruptcy filing is possible.

Update, Aug 22: The following was sent out to notify employees that First Magnus has sought bankruptcy protection:

Dear Friends and Former Colleagues:

Since being forced to cease operations on August 16, 2007 due to our secondary market investors withdrawing prior agreements and freezing First Magnus's accounts, we have been assessing how to best wind down operations and repay all of our creditors, including you, our former employees. From the outset, we have been focused on making the August 20, 2007 payroll and explored all options that would have permitted that result. Regrettably, despite our efforts, we were unable to do so.

As a result, First Magnus today filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Arizona. As part of the filing, we asked the Bankruptcy Court for permission to access currently unavailable funds to pay wages due to you, our former employees. Obtaining an order from the Court approving release of funds for payment of wages will insure that your wages will not be subject to other creditors' claims. Unfortunately, this process will take weeks to complete.

In order to help some of you through this difficult time, we have set up an Employee Assistance webpage on which we will disseminate information that may be of interest to you. This page, which can be accessed from www.firstmagnus.com, will be periodically updated. Currently, you will see information about the job fair Monday, August 27, 2007 from 10 am to 1 pm at the Westin La Paloma that already has more than a dozen potential employers attending, as well as job assistance agencies. We also have a classified section that contains information from potential employers across the United States with whom you may be able to find employment.

We are deeply saddened by the events of this past week. Our hearts and our thoughts are with each and every one of you and we wish you all the very best in your future endeavors.

Please visit the Employee Assistance webpage for additional information over the coming days and weeks.

The First Magnus Executive Management Team