First Guaranty Mortgage Corp. files for Chapter 11 bankruptcy protection

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  • The action has no impact on closed mortgages.
  • Company has financing arranged to finance critical operations.

PLANO, TX, June 30, 2022 /PRNewswire/ — First Guaranty Mortgage Corp. (“FGMC” or “the Company”) today announced that the Company and its subsidiary Maverick II Holdings, LLC have filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of Delaware protect the business while exploring all available restructuring options. The Company has begun notifying its regulators and other affected parties.

The action has no impact on closed mortgages, which are already managed by third parties.

The Company has taken steps to accommodate the maximum number of borrowers who have started but not yet completed the loan process. FGMC is in the process of finalizing debtor-in-possession financing that will enable it to close and fund approved consumer loans, under existing terms and conditions. Additionally, the Company has further identified one or more potential partners to provide an option to support the ongoing loan pipeline.

The debtor-in-possession financing, once approved by the court, will also support the Company’s operations, including future payments to employees and suppliers in the normal course and pursuant to bankruptcy provisions. In addition, FGMC is in the process of developing an employee incentive and retention program, which requires court approval.

“While we have made considerable efforts to address our ongoing financial challenges related to the state of the mortgage market, we must ultimately do what is best for our borrowers and our consumers,” said Aaron’s Samples, CEO of FGMC. “After careful consideration and reflection, the Company has determined that pursuing Chapter 11 protections is the right and responsible course at this time. As part of this process, the Company has retained a portion of its workforce to manage day-to-day operations. . We are asking the court to approve a variety of motions that will promote a smooth transition for all parties involved while preserving value for the benefit of the company’s stakeholders.”

The Chapter 11 filing was necessitated by significant operating losses and cash flow issues experienced by the Company due to unforeseen historical adverse market conditions for the mortgage industry, including unforeseen market volatility . The sharp and unexpected drop in performance reflects the intense pressure on mortgage originations due to the dramatic collapse of the mortgage refinancing market and the weakening of the mortgage purchase market, which suffered from a lack housing stocks and increasing affordability problems. These factors have resulted in significant losses to the company’s total mortgage income and overall liquidity constraints.

Federal law prohibits the Company from paying amounts owing for obligations arising before the June 30, 2022, date of filing, without court order. Entities that owe funds may be eligible to file a claim. For more information on the complaints process, please visit http://www.kccllc.net/FGMC.

Media Contact: [email protected]

SOURCE First Guaranty Mortgage Corp.

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