The long-running saga of Farragut Mortgage Co. may be nearing its end. The struggling company announced that it has suffered a series of crippling and possibly lethal blows.
On Monday, trading in Farragut shares on the American Stock Exchange was delayed.
The company announced Tuesday, as the delay continued, that on May 4 Freddie Mac had stripped it of its ability to originate or service loans.
Further, because Farragut no longer meets net-worth covenants, Bank of New York and Residential Funding Corp., its warehouse lenders, have pulled the line of credit and purchased all loans in the Massachusetts lender's warehouse.
No Secondary Outlets
This, in turn, caused Fannie Mae to revoke Farragut's modified-seller status, leaving the mortgage bank with no secondary outlets.
The company no longer meets minimum net worth guidelines, so the Massachusetts Banking Commissioner ordered Farragut on Monday to stop taking mortgage applications and to transfer loans in its pipeline to other lenders, steps already taken.
Farragut has closed its seven branch offices and laid off 70 of its 90 or so workers.
Because it no longer meets listing requirements, the company's common stock will be removed from the Amex. Friday will be its last day of trading, which reopened Wednesday. The shares were trading at 12.5 cents, down from 37.5 cents before the suspension.
Talks with Investor Group
Farragut is negotiating with a prospective investor group, according to Stephen H. Dickmann, chairman and chief executive officer.
The group said a letter of intent to invest about $6.5 million in exchange for a majority of the company's common stock would be issued within a week, according to Mr. Dickmann.
However, "there can be no assurances that the letter of intent, if issued, will ultimately result in a capital infusion."
He said an investor would buy "a $19.5 million operating loss, a publicly held company, and mortgage banking expertise."