Friday, February 8, 2008

First Magnus Financial Took a Huge hit with this one

Here is a good story. This is is a no money down story based in Rockaway, NJ - 4 bed, 3 bath with an attached 2 car garage. From the pictures it looks pretty nice.

  • Purchased Jan 2006 - $530,000
  • Mortgage Jan 2006 - $106,000 - First Magnus Financial/Mortage Electronic Registration Systems Inc.
  • Mortgage Jan 2006 - $424,000 - Interest Only ARM First Magnus Financial/Mortage Electronic Registration Systems Inc.
  • Sold Nov 2007 - $460,000

This appears to be a pre-foreclosure sale - through a realtor. So dropping the 6% realtors fees First Magnus lost approx $98,000. So we decided to google First Magnus and of course they went Bankrupt. From their cached website:

First Magnus is No Longer Funding any Mortgage Loans

In light of the collapse of the secondary mortgage market, First Magnus will not fund any future mortgage loans, and is no longer accepting any mortgage loan applications or funding any mortgage loans previously originated and not yet funded. We explored all options before taking this action but were left with no viable alternative.

First Magnus values the relationships we have formed with all of our broker partners over the years and appreciate the trust you have shown in us. We are saddened that we will no longer have the opportunity to work with you.

We may not be financial wizards but we are not surprised. This was a horrible business practice. It only lasted while pricing were going up so people thought it could not lose. Look at the numbers - this mortgage in the example above went to foreclosure in less than 2 years. Even paying a higher interest rate their would be no way the bank could recoup a portion of the money they lost. They did not require any down payment - 100% funding with an Interest only ARM. Probably even calling this house a pre-foreclosure is a bit of a stretch since they were renting from the bank.

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