Beleaguered First Guaranty Mortgage Corp. files for bankruptcy

Texas-based First Guaranty Mortgage Corp. filed for bankruptcy protection on Thursday, citing “significant” operating losses and cash flow issues amid market shifts fueled by rising rates, a company spokesperson told Mortgage Professional America. The move comes on the heels of the lender’s termination of 248 employees – representing 75% of its workforce at the affected hub in Plano, Texas, a suburb of Dallas.

“Earlier today, First Guaranty Mortgage Corp. filed for Chapter 11 protection in order to protect its business and borrowers in the face of significant operating losses and cash flow challenges experienced by the company due to unforeseen historical adverse market conditions for the mortgage industry,” a spokesperson for FTI Consulting, a public relations firm, wrote in a statement.

Despite the filing, the spokesperson noted, the action has no impact on closed mortgages “…which are already serviced by third parties.” Moreover, the beleaguered lender is working to close pending loans: “The company has taken action to accommodate the maximum number [of] borrowers who have started but not yet completed the loan process, both in the form of a DIP [debtor in possession} that will enable it to close/fund approved consumer loans and identifying partners to support the pipeline.”