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First Magnus Financial Corp., a mortgage lender that is one of Tucson’s only locally based national firms and one of the area’s major employers, is no longer writing loans as of this morning.

It’s unclear what the action means to customers who have mortgages pending with the company, which employs hundreds locally. It is the latest example of woes in the nation’s mortgage industry, which are blamed on delinquencies and other problems in the subprime lending market.

An e-mail Wednesday evening told branch managers of Great Southwest Mortgage, the retail arm of First Magnus, that the parent company was no longer funding loans. First Magnus ranked 61st in the Star 200 survey of the biggest employers of Southern Arizona, reporting 800 full-time-equivalent local employees.

“We will not be funding loans tomorrow,” wrote Erik Lutz, the president and founder of Great Southwest. A manager with the company, who spoke on condition of anonymity, said he was told Wednesday evening that First Magnus was closing. However, he said Great Southwest hopes to stay in business by brokering loans elsewhere. “All my employees were unaware until I told them, and they were pretty shocked,” the manager said late Wednesday. “As loan officers, we’re going to move on to some different companies. We’re still going to stay in our field. We’re going to regroup and figure out the best places to go.”

Ron Briskman, a Great Southwest branch manager in Scottsdale, said he’s not convinced First Magnus is closing. “It could very well be that the company goes into a Chapter 11 (bankruptcy) situation,” which would give the company time to reorganize, he said.

What is happening at First Magnus is similar to what sank American Home Mortgage, which quit writing home loans Aug. 3 and filed for bankruptcy protection three days later, the other Great Southwest manager said.

American Home blamed its troubles on margin calls from banks that had provided it with the cash necessary to write mortgages.

But First Magnus said subprime loans to people with poor credit histories constituted only a small share of the company’s business.

In his e-mail, Lutz expressed sadness and said he would share more information at an 11 a.m. meeting with branch managers today.

“Nearly all the people that I care about in this world have relied on this great company to raise their families and grow professionally,” Lutz wrote. “While many of the questions that you will have I cannot answer tonight, I wanted to give each of you some time to call your people before that notice goes out.”

First Magnus was founded in July 1996 by Tom Sullivan Sr., Tom Sullivan Jr. and G.S. Jaggi. The elder Sullivan helped start Title Security Agency of Arizona in the early 1970s and provided initial funding for First Magnus.

None of the three could be reached for comment late Wednesday.

Headquartered at 603 N. Wilmot Road, First Magnus has described itself as “one of the largest privately held mortgage banking operations” in the country, lending in all 50 states.

It funded loans in excess of $30 billion in 2006, has more than 350 offices and more than 5,000 employees.

In 2005, First Magnus made the list of Inc. magazine's 500 fastest-growing private companies. It ranked 161 on the list with 2003 revenue of $336,367,423 and annual sales growth of 206 percent.

The financial services giant and parent company of mortgage lender Charter Funding had been working toward expanding into retail banking.

The leaders of First Magnus had applied to the federal Office of Thrift Supervision to obtain a charter for a new federal savings bank named First Magnus Federal Bank.

But First Magnus’ application was suspended July 31, 2006, according to a letter sent to the company from the Office of Thrift Supervision obtained by the Arizona Daily Star through a records request.

In March, a senior First Magnus official told the Star that  Tucson’s lending situation remained good, although the industry had become more conservative.

Doug Olson, general manager of Arizona retail lending for First Magnus Home Loans, said at the time there was “very significant” tightening of guidelines for lending, because of concerns about creditworthiness and property values.

Besides being a major local employer, First Magnus has been a key corporate citizen. First Magnus and Charter Funding have been title sponsors of the El Tour de Tucson bicycle race for the past six years.

First Magnus also is a major donor to the historic Fox Theatre in Downtown Tucson. The company donated $500,000 to the Fox restoration, and the theater’s auditorium is named after the company.