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The Mortgage Graveyard
Failed, closed and a c q u i r e d mortgage-related entities.



AmTrust Fails

High concentration of loans in hard-hit states blamed

Dec. 7, 2009

By Mortgage Daily staff



AmTrust Bank, a big wholesale lender, has failed. Its regulator blamed a high concentration of loans in hard-hit states for its demise. The institution had weathered the Great Depression, but the Great Recession was more than it could handle.

The Office of Thrift Supervision seized and closed the Cleveland-based bank on Friday and handed it over to the Federal Deposit Insurance Corporation.

AmTrust was founded in 1921 and ranked among the country's top 15 wholesale mortgage lenders.

The OTS said AmTrust was "in an unsafe and unsound condition because of deteriorating asset quality and insufficient capital." The regulator issued a prompt corrective action directive against the bank on Nov. 4.

"AmTrust incurred substantial operating losses in 2008 and 2009
due to poor asset quality, escalating levels of non-performing assets, and loan loss provisions that severely depleted capital," an OTS fact sheet stated. "AmTrust's high level of problem assets was attributable to residential and land acquisition, development, and construction lending concentrated in Florida, California, Arizona, and Nevada."

Parent AmTrust Financial Corp. filed a voluntary petition for Chapter 11 Bankruptcy in the U.S. Bankruptcy Court for the Northern District of Ohio on Nov. 30.

AmTrust Bank employed 1,728 people and operated 65 branches in Arizona, Florida and Ohio. In prior promotional material it claimed to be among the 20 largest U.S. mortgage lenders.

New York Community Bank agreed to assume all of AmTrust's $8.0 billion in deposits as of Oct. 27. It also agreed to acquire $9.0 billion of AmTrust's $12.0 billion in assets. Among AmTrust's assets were $6.8 billion in one- to four-unit residential loans and $1.2 billion in construction-and-land-development loans.

The FDIC agreed to share in losses on $6.0 billion on the assets acquired by New York Community Bank -- which issued a statement indicating that it acquired no non-performing assets. As a result, the FDIC expects a $2.0 billion hit to the Deposit Insurance Fund.

New York Community Bank Chairman, President, and Chief Executive Officer Joseph R. Ficalora said the acquisition "provides an attractive source of funds to invest in loan production and to reduce our funding costs."

As part of the deal, the FDIC received an equity appreciation instrument from New York Community Bank that can be exercised between Dec. 9 and Dec. 23.

A spokeswoman for New York Community Bank didn't immediately respond to a request for a statement on the plans for the wholesale lending unit.

AmTrust was the 128th FDIC-insured bank failure during 2009.


In re. AmTrust Financial Corporation, et al.
Case No. 09-21323-pmc, Nov. 30, 2009 (U.S. Bankruptcy Court for the Northern District of Ohio).

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