First Franklin Financial Corp.

First Franklin Financial Corp. was a United States mortgage lender headquartered in San Jose, California. It was established in 1981 to serve borrowers in the prime-credit market, but changed its business focus in 1994 toward nonprime lending, including subprime residential mortgages. This strategic shift placed the company in a segment that expanded rapidly during the housing and mortgage-credit boom of the 1990s and 2000s, while also exposing it to the severe deterioration that followed the collapse of the U.S. housing market. The company changed ownership several times. In 1994 it was acquired by DLJ Merchant Banking Partners, an investment unit associated with Donaldson, Lufkin & Jenrette. In 1999, National City Corp. acquired First Franklin from a Bank of America subsidiary for $266 million. Under National City, First Franklin became an important contributor to the parent company's mortgage operations. By 2003, its activities helped National City rank as the sixth-largest mortgage lender in the United States. First Franklin specialized in originating mortgages for borrowers who did not qualify for conventional prime-credit products. Its loans could be sold or assembled into mortgage-backed securities, making the company part of the broader originate-to-distribute model that characterized the pre-2008 mortgage market. In December 2006, Merrill Lynch acquired First Franklin from National City for $1.3 billion. Merrill Lynch viewed the business as a source of mortgage loans that could feed securitization activity, even though the subprime market was already showing signs of stress. During the fourth quarter of 2006, First Franklin was reported as the fifth-largest subprime lender in the United States. The company's scale and market position made it a notable participant in the subprime mortgage industry, but its business model became increasingly difficult to sustain as delinquencies, defaults, falling home prices, and investor concern undermined the market for subprime mortgage assets. On March 5, 2008, First Franklin stopped originating new loans. The shutdown occurred during the wider subprime mortgage crisis and preceded the rapid weakening of both Merrill Lynch and National City. Merrill Lynch later alleged that National City had misrepresented the condition of First Franklin in connection with the earlier sale. Merrill Lynch was acquired by Bank of America in September 2008, while National City was acquired by PNC Financial Services in October 2008. These transactions reflected the broader consolidation and distress among financial institutions affected by the crisis. First Franklin therefore represents a mortgage-lending business whose expansion, ownership changes, securitization role, and eventual cessation of originations were closely connected to the rise and collapse of the U.S. subprime mortgage market. This company is distinct from 1st Franklin Financial Corporation, a separate southeastern U.S. installment-loan provider. The supplied 1ffc.com website and installment-loan description refer to that different namesake and have not been attributed to First Franklin Financial Corp.

First Franklin Financial Corp. was founded in 1981 in San Jose, California, as a mortgage lender serving the prime-credit market. One of its co-founders was Bill Dallas, who later held the roles of chairman and chief executive officer and subsequently became chairman emeritus. The company initially operated in the conventional mortgage environment, but in 1994 it changed direction and began concentrating on nonprime borrowers. That change coincided with the growth of specialized mortgage finance. Instead of limiting its business to borrowers with strong credit profiles, First Franklin developed a role in originating residential mortgages for customers who were less likely to qualify for prime loans. The company was acquired in 1994 by DLJ Merchant Banking Partners, an investment unit of Donaldson, Lufkin & Jenrette. In 1999, National City Corp. bought First Franklin from a Bank of America subsidiary for $266 million. National City used First Franklin as part of its expansion in mortgage lending. By 2003, First Franklin's contribution helped National City become the sixth-largest mortgage lender in the country. The company's nonprime orientation also connected it to the rapidly expanding market for subprime mortgages, in which loans were frequently originated for eventual sale, pooling, or securitization rather than retained entirely by the originating institution. In December 2006, Merrill Lynch purchased First Franklin from National City for $1.3 billion. Merrill Lynch's stated strategic rationale was to obtain a continuing pipeline of mortgage loans that could be packaged into mortgage-backed securities. The acquisition took place after the subprime market had begun to weaken, making the transaction emblematic of the late-stage expansion of financial institutions into mortgage origination and securitization. In the fourth quarter of 2006, First Franklin was identified as the fifth-largest subprime lender in the United States. The market environment deteriorated sharply thereafter. Rising defaults, falling property values, tighter credit, and declining investor demand affected lenders focused on nonprime mortgages. On March 5, 2008, First Franklin halted loan originations. Merrill Lynch subsequently alleged that National City had misrepresented the condition of First Franklin before the 2006 sale. The dispute occurred against the background of the broader subprime crisis, which severely damaged both mortgage originators and major financial institutions that acquired or financed them. Merrill Lynch was acquired by Bank of America in September 2008, and National City was acquired by PNC Financial Services in October 2008. First Franklin's cessation of originations and the subsequent ownership changes mark the end of its identifiable operating role as a major subprime mortgage originator. The company should not be confused with 1st Franklin Financial Corporation, a separate brand that provides installment loans in the southeastern United States.

1. 2008Loan originations cease

   First Franklin halted new loan originations on March 5 during the intensifying subprime mortgage crisis.

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2. 2006Merrill Lynch acquisition

   Merrill Lynch acquired First Franklin for $1.3 billion to support a mortgage-origination pipeline for securitization.

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3. 2006Ranks among leading subprime lenders

   First Franklin ranked fifth among U.S. subprime lenders in the fourth quarter.

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4. 2003National City reaches major mortgage-lender ranking

   First Franklin's activities helped National City become the sixth-largest mortgage lender in the United States.

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5. 1999Acquired by National City

   National City Corp. acquired First Franklin from a Bank of America subsidiary for $266 million.

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6. 1994Shift to nonprime lending

   The company moved away from its original prime-credit focus and began concentrating on nonprime mortgage lending.

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7. 1994Acquired by DLJ Merchant Banking Partners

   First Franklin was purchased by DLJ Merchant Banking Partners, associated with Donaldson, Lufkin & Jenrette.

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8. 1981Company founded in San Jose

   First Franklin was established in San Jose, California, initially serving borrowers in the prime-credit mortgage market.

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A specialist lender serving nonprime and subprime residential mortgage borrowers after its 1994 shift away from prime-credit lending.

• Prime residential mortgagesResidential mortgage lending1981

  These were the company's original lending focus after its 1981 founding. First Franklin was created to serve borrowers with stronger credit profiles before later changing its strategy toward nonprime lending.

• Nonprime residential mortgagesResidential mortgage lending1994

  Beginning in 1994, First Franklin concentrated on home loans for borrowers outside the conventional prime-credit segment. This became the central business of the company and supported its growth as a specialist mortgage originator.

• Subprime mortgage loansSpecialty mortgage lending1994

  First Franklin became a significant U.S. subprime lender, originating residential mortgages for borrowers with weaker credit profiles. The loans formed part of a broader mortgage-finance pipeline in which originations could be sold or packaged into mortgage-backed securities.

• 2008Stop originating new loansStrategy

  The subprime mortgage market was undergoing severe deterioration, with weakening credit performance and reduced market liquidity.

  What changed. First Franklin halted loan originations on March 5, 2008.

  Aftermath. The decision effectively ended the company's role as an active large-scale mortgage originator and was followed by allegations concerning the accuracy of information provided during its earlier sale.

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• 2006Merrill Lynch acquires First FranklinM&A

  First Franklin was a large subprime lender, and Merrill Lynch sought a dependable source of loans for mortgage-backed-securities activity.

  What changed. Merrill Lynch bought First Franklin from National City for $1.3 billion.

  Aftermath. The acquisition was followed by the rapid deterioration of the subprime market, and First Franklin stopped originating loans in March 2008.

  Acquisition price. $1.3 billion (December 2006)

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• 1999National City acquires First FranklinM&A

  First Franklin had become a specialized nonprime mortgage lender after its strategic repositioning.

  What changed. National City purchased the company from a Bank of America subsidiary for $266 million.

  Aftermath. First Franklin contributed to National City's expansion and helped the parent reach a leading U.S. mortgage-lender ranking by 2003.

  Acquisition price. $266 million (1999)

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• 1994Redirect the business toward nonprime lendingStrategy

  First Franklin had been founded to serve the prime-credit mortgage market, but specialized mortgage finance was expanding beyond conventional borrowers.

  What changed. The company shifted its lending focus to nonprime borrowers, later becoming identified with subprime mortgage origination.

  Aftermath. The shift enabled substantial growth but left the company exposed to the deterioration of the subprime mortgage market.

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• 2008Alleged misrepresentation concerning First Franklin's conditionControversy

  Following First Franklin's halt of loan originations, Merrill Lynch alleged that National City had misrepresented the condition of the company in connection with the 2006 acquisition. The allegation formed part of the fallout from the subprime mortgage crisis.

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• 2008First Franklin halts loan originations

  The company stopped originating new loans on March 5, 2008, during the escalating U.S. subprime mortgage crisis.

  BankruptcyOther
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• 2006First Franklin becomes a major U.S. subprime lender

  First Franklin ranked as the fifth-largest subprime lender in the United States during the fourth quarter of 2006.

  Other
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• 2006Merrill Lynch purchases First Franklin

  Merrill Lynch acquired First Franklin for $1.3 billion, intending to use its loan-origination platform as a source of mortgages for securitization.

  M&A
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• 1999National City acquires First Franklin

  National City Corp. purchased First Franklin from a Bank of America subsidiary for $266 million.

  M&A
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• 1994First Franklin shifts from prime to nonprime lending

  The company changed its business focus from serving prime-credit borrowers to originating loans for the nonprime market.

  Other
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1. First Franklin Financial Corp.