Tucson-based First Magnus laid off 700 out of 800 here
August 18, 2007
Job losses from the collapse of Tucson-based mortgage lender First Magnus Financial Corp. total nearly 6,000 nationwide, according to a required notice the company filed with state officials on Friday.
The lender effectively shut down its business and laid off about 99 percent of its total workers. In Tucson, First Magnus laid off about 700 of its approximately 800-person work force when it abruptly stopped writing loans on Thursday.
The company's troubles stemmed from its practice of making loans and immediately selling them to investors. Amid problems in the secondary mortgage market, First Magnus found it could no longer sell its loans, said Tom Sullivan Sr., the company's chairman.
The jobs lost in Tucson amount to about 5 percent of all local financial services workers, said Austin Litvak, of Moody's Economy.com. That might make finding new jobs in the same industry difficult for some former First Magnus employees, he said.
"The impact on the local economy in Tucson is going to be rather big," said Don Wehbey, senior economist at the Arizona Department of Economic Security's Research Administration.
Former First Magnus mortgage auditor Rachel Nichols, 50, has already scoured job listings and sent off three résumés after finding out she lost her job on Thursday.
But Nichols said her chances for finding a comparable job — quickly enough to keep up with her bills — probably aren't good.
"Right now, I'm working on getting my unemployment (benefit forms) filled out," she said.
On the bright side, Tucson's economy is still adding jobs, which is not true in all parts of the country, Litvak said. However, much of that growth is in lower-paying jobs in areas such as retail and tourism, he said.
"The lower-paying service industries we're still expecting to expand," Litvak said.
First Magnus and other mortgage lenders in Tucson are working to cushion the blow by holding job fairs in space donated by The Westin La Paloma Resort & Spa and the Sheraton Tucson Hotel & Suites.
For employees paid only on commission, such as loan officers, finding a new job might not be difficult, said a job fair organizer, Wendy Whitehead of Stewart Title & Trust of Tucson. But for support workers and other salaried employees, "I think we're going to find a challenge," she said.
Some local lenders have already hired First Magnus employees, including former First Magnus branch Home Loan Executives, which broke away from its parent in January.
"We expect to recruit as many as we can and expand," said Carmine Russo, managing director. The company has already hired three First Magnus vice presidents, he said.
Another factor adding to the difficulties for former First Magnus employees: Many are still awaiting final paychecks. The company has told former workers that checks might be mailed on Monday, said First Magnus spokesman Gary Baraff.
Under Arizona law, employers are required to pay employees within three working days, or on the company's next regular pay day, whichever is sooner. A spokesman from the U.S. Department of Labor Wage and Hour Division said the agency is aware of the situation, and is in the process of ensuring that workers get paid.
If First Magnus fails to pay employees, any whose paycheck would have been up to $2,500 can file a complaint with the Industrial Commission of Arizona. Workers whose checks would be more than $2,500 have little recourse other than filing a lawsuit, said Tucson attorney Tibor NagyJr.
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