FirstCity Financial Corp. said Friday that it is quitting mortgage banking, which it conducts through FirstCity Financial Mortgage Corp. and FirstCity Capital Corp.

The financial services company bought the mortgage business in 1997 and was hurt when falling rates last year cut into its servicing business, said Mike Grondahl of U.S. Bancorp Piper Jaffray. The company posted a net loss of $44.5 million on revenues of $33.65 million in the second quarter.

The mortgage arms are in default on loan agreements with warehouse lenders, FirstCity said. -- Hala Habal

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