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

First Bank Failure of 2010

Recent closings of mortgage-related companies

Jan. 11, 2010

By staff

The nation's first bank failure this year is likely to cost more than $500 million. So far in 2010, two mortgage-related firms have failed, while the tally for 2009 -- including a reverse mortgage lender that filed bankruptcy -- reached 227.

On Friday, the Washington Department of Financial Institutions announced the seizure of Horizon Bank. The state said inadequate capital and severe loan losses were responsible for the Bellingham, Wash.-based bank's failure -- the first federally insured failure this year.

"Horizon's capital has been depleted by large loan losses," DFI Division of Banks Director Brad Williamson said in the statement. "Like many banks across the country, Horizon's real estate construction and development portfolio has suffered as real estate values have fallen."

The FDIC issued a cease-and-desist order against Horizon on March 3, 2009.

Washington handed the 18-branch institution over to the Federal Deposit Insurance Corporation, which sold Horizon's $1.1 billion in deposits as of Sept. 30 to Washington Federal Savings and Loan Association at par. Washington Federal also acquired all of the failed bank's $1.3 billion in assets.

With the FDIC sharing in losses on $1 billion of the assets, the Deposit Insurance Fund is expected to take a $539 million hit.

The last credit union to fail in 2009 was HeritageWest Federal Credit Union, which was liquidated on Dec. 31, 2009, by the National Credit Union Administration, a news release indicated. Chartway Federal Credit Union purchased the Tooele, Utah-based institution, which had $311 million in assets and more than 40,000 members as of its demise.

The failure of HeritageWest brought to 20 the number of credit unions to fail last year.

More recently, on Jan. 5, the NCUA shut down First Service Credit Union. Marine Credit Union took over the Milwaukee-based credit union, which was originally chartered in 1934.

First Service's closure marked the second mortgage-related closing during 2010.

In a recent interview with the Las Vegas Sun, Silver State Schools Credit Union President Dave Rhamy warned that the troubled institution is still seeking a cash infusion so it can stay afloat. Attorneys from the Las Vegas-based credit union are in ongoing meetings with American Share Insurance and Nevada's financial institutions division.

The Sacramento Business Journal reported that New Horizons Reverse Mortgage Inc. filed for Chapter 7 bankruptcy liquidation. The Folsom, Calif.-based firm's president, Michael Carroll, was quoted as saying, "Everything shifted, and it shifted really quick."

Including all banks, credit unions and lenders -- the failure of 227 mortgage-related firms was tracked by for 2009.

U.S. Bankruptcy Judge Duncan W. Keir approved ADFITECH Inc.'s proposed disclosure statement as it attempts to emerge from Chapter 11 Bankruptcy, according to court documents. Creditors can raise objections to the plan at a confirmation hearing scheduled for Feb. 24.

ADIFITECH parent Thornburg Mortgage Inc. was a big jumbo lender that was unable to stay in business following the collapse of the secondary market for nonconforming loans. Thornburg, based in Santa Fe, N.M., filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in U.S. Bankruptcy Court for the District of Maryland in May 2009.

In re. ADFITECH Inc.
Case No. 09-17788, May 1, 2009 (U.S. Bankruptcy Court for the District of Maryland)

In re. Thornburg Mortgage Inc.
Case No. 09-17787, May 1, 2009 (U.S. Bankruptcy Court for the District of Maryland)

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