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Mortgage Mess Toll Rises

First National of Arizona shuts down a mortgage unit.

First National Bank of Arizona has become the latest casualty in the mortgage collapse that is gripping U.S. lenders.

The privately held bank has shuttered its wholesale mortgage lending division, according to mortgage brokers who have spoken with the lender.

A call to the bank's executive office was directed to president and CEO Gary Dorris, who did not immediately return calls. A call placed to one of its mortgage representatives was met with the greeting that the bank had shut down its wholesale lending unit.

"Effective August 21st," the message said, the bank "has suspended all wholesale lending operations however will be honoring and funding all loans locked prior to August 20th."

The news comes as standalone mortgage lenders have been crushed by the implosion of the secondary market for mortgage-backed securities, following a sharp rise in defaults and delinquencies by homebuyers with poor credit histories.

Dozens of small lenders have closed up shops, and giants like

Thornburg Mortgage

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Countrywide Financial


have been forced to take drastic measures to remain afloat.

Countrywide shares plunged last week after the nation's biggest lender tapped a $11.5 billion credit facility after it was unable to roll over short-term commercial paper that supported its lending practice. Thornburg sold a third of its mortgage securities portfolio in a bid to reduce its exposure to margin calls and improve liquidity.

First National of Arizona dates back to 1998 with the purchase of Laughlin National Bank, now known as 1st National Bank of Nevada, followed by the establishment of 1st National Bank of Arizona. The company has over $4 billion in assets and over 2000 employees and is the largest locally owned bank in the Southwest, according to its Web site.