First Magnus Financial hit by mortgage industry 'collapse,' files Chapter 11 bankruptcy

By Caroline Salls

Pittsburgh, Aug. 22 - First Magnus Financial Corp. filed Chapter 11 bankruptcy Tuesday in the U.S. Bankruptcy Court for the District of Arizona, the latest victim of the "collapse" of the mortgage loan industry.

First Mortgage said all of its warehouse lenders have discontinued financing to the company as a result of alleged defaults on its master repurchase agreement.

As a result, First Magnus said it ceased operations and laid off most of its employees on Aug. 16.

"Last week, it became apparent that First Magnus Financial simply could not withstand the liquidity crisis that has resulted in the demise of numerous other mortgage lenders," First Magnus president, chief executive officer and director Gurpreet S. Jaggi said in a court filing.

Jaggi said the company has retained MCA Financial Group, Ltd. to help wind down First Magnus' business, including the sale of its mortgage loans and related assets, rejection of leases and contracts and a reduction in the remaining workforce.

According to Jaggi's declaration, the wind down should cost the company $12 million to $13 million, and it is expected to provide a roughly $26 million net recovery for creditors.

In addition, First Magnus is negotiating with several sources to obtain $10 million to $15 million in debtor-in-possession financing.

The company listed $942.11 million in assets and $812.53 million in debt.

First Magnus' largest unsecured creditors include National Bank of AZ LOC, Tucson, Ariz., with a $5 million trade debt claim and WNS North America Inc., New York, with a $2.82 million trade debt claim.

First Magnus is a Tucson, Ariz., mortgage loan originator. Its Chapter 11 case number is 07-10578.

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