The proverbial writing appeared to be on the wall that First Guaranty Mortgage would shutter following news of massive layoffs, but company execs appear to be throwing a hail Mary to keep the business afloat: bankruptcy protection.
According to court documents, the Texas-based national lender filed for Chapter 11 bankruptcy, with plans to submit a reorganization strategy to keep its business alive and pay creditors over time.
The company said it is in the process of finalizing financing “that will enable it to close and fund approved consumer loans, under existing terms and conditions. In addition, the company has further identified one or more potential partners to provide optionality to support the pipeline of in-process loans,” as reported by Inman.
“[Filing] was necessitated by significant operating losses and cash flow challenges experienced by the Company due to unforeseen historical adverse market conditions for the mortgage lending industry, including unanticipated market volatility,” the company said in a statement. “The sharp and unexpected decline in performance reflects the intense pressure on mortgage originations due to the dramatic collapse of the mortgage refinance market and the weakening mortgage purchase market, which has suffered from a lack of housing inventory and increasing affordability issues. These factors have resulted in significant losses on the company’s total mortgage revenues and overall liquidity constraints.”
As we reported earlier this week, First Guaranty Mortgage Corporation, which does business as Goodmortgage in retail branches, cut about 80 percent of its team and has stopped accepting new mortgage applications.
HousingWire reports that First Guaranty Mortgage Corporation laid off around 500 employees without severance payment.