First Guaranty Mortgage Corp. FGMC has filed for chapter 11 bankruptcy protection “to protect the business while exploring all available restructuring options,” the company announced in a press release, citing significant operating losses and cash flow challenges due to adverse market conditions.
The action has no impact on closed mortgages, which are already serviced by third parties, according to the release.
The filing came on the heels of FGMC’s termination of 76% of its staff last week, about 460 employees. One impacted employee referred to the company as “essentially shuttered” at that point.
FGMC has “taken action to accommodate” the maximum number of borrowers who have started but not yet completed the loan process, and said it is finalizing debtor-in-possession financing that will enable it to close and fund approved consumer loans under existing terms and conditions. FGMC said it also has identified one or more potential partners to support the pipeline of in-process loans.
“While we have made considerable efforts to address our ongoing financial challenges related to the state of the mortgage market, we ultimately must do what is best for our borrowers and consumers,” said Aaron Samples, chief executive officer of FGMC. “After careful review and consideration, the Company determined that pursuing the protections of chapter 11 is the right and responsible path at this time. As part of this process, the Company retained a portion of its workforce to manage the day-to-day business.”