Franklin Credit Management Corporation, primarily a scratch-and-dent mortgage operation, said late Thursday that it had entered into debt restructuring with its primary creditor, The Huntington National Bank. HW reported in November on the woes at Franklin Credit, which at the time said it might not survive. At the time, Huntington said it would take a $300 million loss on its $1.5 billion exposure to the mortgage operation. Not surprisingly, Franklin Credit said today that its "indebtedness to the Bank was reduced by approximately $300 million," and that it had restructured the $1.5 billion in outstanding indebtedness under modified terms. (Methinks there is irony here -- Franklin Credit, now subject to the equivalent of a loan modification.) Paul Colasono, Franklin's CFO, said the debt reduction would result in a substantial paper gain that would likely restore positive net worth to the company in its fourth quarter earnings report. Franklin had earlier indicated that it expected to report “substantial negative stockholder's equity." As part of a strategy to grow revenue -- and an implicit admission that the scratch-and-dent market has become dead weight -- Irwin will look to launch a due diligence practice, CEO Gordon Jardin said. "We have a proven ability to assess mortgage portfolios, especially those containing loans to difficult borrowers, including strong capabilities in identifying loan fraud and other contractual reasons for putting loans back to originators and sellers," Jardin said, "and this segment of the mortgage business is expanding rapidly." The company also said it wants to grow its special servicing business on a third-party basis, looking to leverage its specialized experience in managing non-performing loans. For more information, visit http://www.franklincredit.com. Disclosure: The author held no positions in FCMC when this post was originally published.