Mortgage Company Files For Chapter 11 Protection

Associated Press
Wednesday, August 15, 2007

HOUSTON -- Aegis Mortgage, which last week stopped making new loans and laid off much of its staff, has filed for Chapter 11 bankruptcy protection.

The company, whose owners include private-equity firm Cerberus Capital Management, made the filing Monday in Delaware. It said the action was necessary "to address financial challenges resulting from the recent extraordinary decline in conditions in the secondary mortgage market and national real estate market."

In court papers, Aegis, at one time one of the 30 largest U.S. home lenders, said its creditors number between 1,000 and 5,000. It also estimates both its assets and its liabilities at more than $100 million.

Last Monday, Aegis said it had stopped taking new loan applications and, a day later, that it had laid off a "substantial" number of its 1,300 workers.

"We are working to wind down our business affairs as expeditiously as possible, with the goal of preserving Aegis's value for the benefit of all parties concerned," Dan Gilbert, Aegis's chief executive, said in a statement. "We're deeply disappointed that the rapid decline in market conditions compelled us to take this action."

Aegis's bankruptcy filing follows by a week a similar filing by American Home Mortgage Investment, the nation's 10th-largest mortgage lender.

Falling home prices and a spike in payment defaults have created turmoil in the mortgage industry. Across the country, lenders are closing their doors and failing to meet commitments they made to fund loans.

In its filing, Aegis said Morgan Stanley, its largest unsecured creditor, is owed nearly $16 million. It lists 34 other unsecured claims, ranging from $71,220 to $14.2 million. Among the other creditors are Goldman Sachs, Deutsche Bank and Merrill Lynch. They're owed $8 million, $1.3 million and $301,637, respectively, according to the filing.

Aegis said it continues to maintain its loan-servicing business.

© 2007 The Washington Post Company