Franklin Credit Management Corp. is back into trouble this quarter, saying in a filing Friday with the Securities and Exchange Commission that it could not file its second quarter results due to the effect of sizeable loss provisions. The scratch-and-dent specialist said that it expected to post a net loss of $280 million to $285 million when it files its second quarter earnings, according to the regulatory filing. The company also said it expects to book a stockholders’ deficit of between approximately $242 million and $247 million when it reports earnings for Q2. Franklin Credit cited “significant further deterioration” in its whole loan portfolio, saying that its acquired second-lien portfolio was “particularly” troublesome from a credit cost and loss perspective. In the fourth quarter, woes at Franklin Credit slammed Columbus, Ohio-based Huntington Bancshares Inc. (HBAN) — the mortgage operations primary creditor — and forced the bank into the red, as Huntington was forced to write off huge chunks of debt tied to the troubled company. The bank seemed more prepared for this quarter’s woes, however, with Huntington CEO Thomas Hoaglin saying that Franklin’s increased losses would not impact the bank. “Franklin’s updated evaluation of its provision and reserves is more in line with the assumptions we used and reserves established as part of our 2007 fourth quarter restructuring of this commercial lending relationship,” he said in a press statement. He also signaled that Franklin Credit may be looking to make some sort of move surrounding its servicing platform, suggesting that the mortgage company was “in the process of evaluating the legal structure of their servicing platform,” although he did not provide further detail. Hoaglin did, however, note that the bank had agreed to modify Franklin’s financial performance covenants to terms “more appropriate to their current situation.” Officials at Franklin Credit and Huntington did not immediately return phone calls seeking comment, but a source in the industry told HW that Franklin Credit was likely facing much of the same cash crunch over advances as other independent servicing operations. Concern over cash flow from servicing operations led Moody’s Investors Service to downgrade its ratings of SN Servicing Corporation last week; servicers are required to advance principal and interest to investors, as well as pay taxes and property maintenance, for varying periods of time throughout the resolution cycle of a defaulted mortgage. “Anyone that’s independently servicing loans is feeling the pinch of advances,” said the source, who manages servicing operations at a commerical bank and commented on the condition of anonymity. “And given the current legislative climate, I’d think it’s going to get worse on that front before it gets better.” Disclosure: The author held no positions in HBAN when this story was published; indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.