Merrill Lynch has pulled the funding plug on First Permanent. The firm ceased to write new business last Friday and advised originators earlier this week.Established in 1994, First Permanent specialised in loans that exceeded valuation and aimed at first-home buyers.Management is considering its options. The sale or transfer of the mortgage book to another servicer, and even the wind up of the firm, have to be likely options. The size of its loan book under management is not clear, but would be no more than a few hundred million. Nurtured within house and land package Devine Home Loans, First Permanent helped line up finance for the customers of its owner. Merrill Lynch bought the firm from Devine a couple of years ago.Given the trend in house prices in outer suburban Sydney and Brisbane, Merrill Lynch and First Permanent may already be managing losses (or expecting to do so) on the equity tranches of the securitised bonds that funded its older loan pool. Merrill Lynch provided warehouse funding for the most recent business.The innovative lender offered a 50-year investment mortgage, with a loan to value ratio up to 106 per cent.