I really feel bad for anyone selling a house right now...

I'll guess there are hundreds of people who were planning to walk into their title company to close on homes today or tomorrow who just find out they have to put their own lives on hold because of what happened today.

First Magnus is a Tucson based company who just happens to be the 17th largest mortgage lender in the U.S., with about $30B in loans originated during 2006, and they were on track for $36B in 2007. 

Until this week, at least...  Now, 800 people in Tucson are now out of work, as are approximately 5,000 nationwide.  

Some companies have made an absolute killing on re-selling mortgages for 110% financing, zero down, etc.  Just like all the people who are now facing foreclosure because they can't afford to make the payments anymore, First Magnus and about 70 other mortgage lenders who closed their doors this year didn't plan too well for the day when their money ran out....

First Magnus to Stop New Loan Funding

First Magnus Financial Corp., a Tucson-based national mortgage lender, is stopping new lending activity effective Thursday and shutting down operations.

A person who answered the phone at the company's Tucson headquarters told The Associated Press Thursday that the company is shutting down operations. A greeting on the company's corporate telephone line confirmed the loan funding issue.

"In light of the collapse of the secondary mortgage market, First Magnus will not fund any mortgage loans after Wednesday, Aug. 15, 2007," the message said. "Additionally, we are no longer accepting any mortgage applications or funding any mortgage loans previously originated but not yet funded.

An e-mail sent to employees Thursday said most workers would be laid off immediately. Workers at company headquarters were leaving Thursday morning with packed boxes and downtrodden expressions.

"You can't plan for something like this," said Aaron Phillips, 29, who worked for the company for five years.

The company, which calls itself one of the largest privately held mortgage banking operation on the country, funded more than $30 billion in loans in 2006 and has more than 250 offices and 5,000 employees.

First Magnus was founded in 1996 by Tom Sullivan Sr., Tom Sullivan Jr. and G.S. Jaggi. None of the three could be reached for comment by the newspaper late Wednesday.

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

The shutdown of First Magnus' operations is the latest in a string of lender collapses. American Home Mortgage quit writing home loans 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 in U.S. Bankruptcy Court in Delaware.

So, it's likely that they'll be declaring bankruptcy in the next few days, and my guess is that I will probably see a few more people applying for one of the tech jobs we're trying to fill right now...

But it's not just relatively small companies in trouble.  Countrywide, the nation's largest mortgage lender, just borrowed $11.5 billion from forty banks in order to continue funding loans.

I don't know about your bank balance, but $11.5B is a pretty hefty number.... Had the news about First Magnus gone public a day or two earlier, I don't know that they would have been able to draw down that much cash...

As much as I hate to pick at the carcass of another company while they're still in business, but my current employer also ended up with a bunch of data center equipment acquired at rock-bottom prices from liquidating Dot Coms back in 2001.  Perhaps that's what will happen with First Magnus, Countrywide, and HBC.  If so, the resulting firesales could save us a bunch of money....

But I doubt we will find financing at 110% of its value...  The days of cheap money are officially gone, and I'm really glad we sold our house in Texas when we did...