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Home buyers screwed by First Magnus Financial bankruptcy
User ID: 258698
08/22/2007 12:51 AM
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Home buyers left in lurch by lender's bankruptcy
By SCOTT BROOKS
New Hampshire Union Leader Staff
30 minutes ago
A national mortgage lender's descent into bankruptcy has deprived as many as 420 New Hampshire families of the loans they need to buy a new home, according to the state Banking Department.
Roughly 20 families have already closed on a home but found their loans were not funded, a violation of New Hampshire state law, Bank Commissioner Peter C. Hildreth said. Those loans, he said, were worth about $3.3 million.
The lender, First Magnus Financial Corp., filed for Chapter 11 bankruptcy protection yesterday, less than a week after it stopped funding home loans and fired most of its employees.
Hildreth ordered an emergency suspension of First Magnus' state mortgage-banking license Monday. In addition, he said, several top executives with the Arizona-based company may have to pay more than $1 million in penalties.
"Our law says they have to have that money when they close that loan," Hildreth said.
Another 400 New Hampshire families were promised a total of $79 million in loans that will not be provided, state banking officials said. Those loans were not closed, Hildreth said.
Department officials are currently contacting brokers in hopes of accommodating families who have lost a loan, he said.
"It's obviously going to be a terrible shock to those people," he said, "and that's why we're making sure the brokers reach out to them."
Several mortgage lenders and brokers contacted yesterday said many families would be inconvenienced but should be able to find another lender.
"These people aren't going to be left high and dry," said Kim Riddell, senior loan officer with National City Mortgage in Bedford.
Before its collapse, First Magnus billed itself as one of the nation's largest privately held mortgage companies, lending in all 50 states. Its fundings in 2006 exceeded $30 billion.
The company, which sometimes did business as Charter Funding and Mortgage Concepts, is the latest in a series of lenders that have imploded during the recent slump in the U.S. housing market. Another lender, American Home Mortgage Investment Corp., filed for bankruptcy protection earlier this month.
More bankruptcies are expected to follow.
"This isn't the last of it," said Joe Moriarty, president of Guardian Mortgage Corp. in Manchester.
Hildreth said the state Banking Department is "keeping a close watch on the industry."
"Our intent is to make sure that people in New Hampshire don't end up like these folks who have closed loans and there's no funding for them," he said.
First Magnus has been a licensed mortgage banker in New Hampshire for at least five years, according to the state. The company has branch offices in Manchester, Nashua and Amherst.
A letter on its Web site says the decision to stop funding loans was made "in light of the collapse of the secondary mortgage market. ... We explored all options before taking this action but were left with no alternative."
Hildreth said the company's inability to fund loans appears to be having a larger impact on New Hampshire than do widely reported difficulties faced by other subprime lenders.
His order would hold several First Magnus executives accountable for the lost loans, including President Gurpreet Jaggi, board Chairman Thomas W. Sullivan Sr. and Vice President and Treasurer Thomas W. Sullivan Jr. All are partial owners.
The state urges anyone expecting funding from First Magnus to contact his or her mortgage broker immediately. Affected residents also may call the Banking Department at 271-3561 or 1-800-437-9000.
[link to www.unionleader.com]