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

Graveyard Journal: Broker Warns About Big Banks

4 banks, 2 mortgage companies close

Feb. 21, 2010

By staff

An Oklahoma mortgage broker, who also is in the state's legislature, has closed his company and warns that big banks are benefiting from federal initiatives at the expense of small firms like his. As another casualty emerged from recent Federal Housing Administration actions against mortgagees, four bank failures last week are expected to cost more than $1 billion.

The Florida Office of Financial Regulation Friday seized Marco Community Bank and, as is done with all federally insured banks that fail, handed the 32-employee firm over to the Federal Deposit Insurance Corporation. The Marco Island, Fla., institution's $117 million in deposits as of Dec. 31, 2009, were assumed by Mutual of Omaha Bank for a 1.5 percent premium.

Mutual of Omaha also acquired all of the six-year-old bank's $120 million in assets -- including $52 million in one- to four-family loans, $19 million in commercial real estate loans and $17 million in construction-and-land-development loans. With the FDIC sharing in losses on $105 million of the assets, the cost to the Deposit Insurance Fund is estimated at $38 million.

Next, the Office of the Comptroller of the Currency shut down La Coste National Bank after determining that the La Coste, Texas, bank "had experienced substantial dissipation of assets and earnings due to unsafe and unsound practices" and was "critically undercapitalized" with no reasonable prospect of recovery without federal help.

Community National Bank assumed 98-year-old La Coste's $49 million in deposits as of Dec. 31 for an 0.51 percent premium and acquired all of its $54 million in assets, which included $5 million in home loans and $2 million in commercial mortgages. The failure of La Coste, which had 11 employees, is estimated at $4 million.

In Orland Park, Ill., George Washington Savings Bank was closed by the Illinois Department of Financial Professional Regulation-Division of Banking. The bank was founded in 1890 and employed 57 people as of Sept. 30, 2009. It held $83 million in residential loans, $38 in commercial mortgages and $178 million in construction-and-land-development loans.

FirstMerit Bank, National Association, assumed George Washington's $397 million in deposits as of Dec. 31 at an 0.31 percent premium and acquired all of its $413 million in assets. The FDIC agreed to a $324 million loss-sharing arrangement and expects the failure to cost $141 million.

Friday's fourth, fattest and final failure occurred in La Jolla, Calif., where the Office of Thrift Supervision closed La Jolla Bank, FSB, because it "was in an unsafe and unsound condition to transact business and was critically undercapitalized with no reasonable prospect of becoming adequately capitalized."

The bank, founded in 1985, had $2.8 billion in total deposits, which were assumed by OneWest Bank FSB at par. OneWest also acquired all of 124-employee La Jolla's $3.6 billion in total assets including $686 million in home loans, $1.827 billion in commercial mortgages and $843 million in construction-and-development assets.

After sharing in losses on $3.31 billion of the assets, the FDIC pegged the cost to its Deposit Insurance Fund at $882 million. La Jolla was the 20th FDIC-insured failure so far this year.

The FDIC issued a statement on Feb. 12 in response to a video from mortgage service provider claiming that OneWest's March 2009 acquisition of IndyMac Federal Bank FSB -- the entity created by the FDIC when the Office of Thrift Supervision closed down IndyMac Bank F.S.B. in July 2008 -- has turned out to be a successful venture by One West at taxpayers's expense.

The FDIC called the company's claims "blatantly false" and clarified that its loss-sharing obligation is limited to 7 percent of assets serviced by the Pasadena, Calif.-based lender and only kicks in after OneWest first takes $2.5 billion in losses. In addition, the lender must adhere to the Home Affordable Modification Program -- which was modeled after FDIC's own strategy for IndyMac loans while it operated the institution.

"OneWest has not been paid one penny by the FDIC in loss-share claims," the FDIC proclaimed. "This video has no credibility."

Premium Capital -- which does business as Topdot Mortgage, lost its Ginnie Approval and was one of five firms to lose FHA mortgagee approval last month -- is calling it quits.

"At this time Topdot is not accepting or processing mortgage applications," a message on its Web site reads. "We hope to resume our business activities in the near future."

Dan Newberry, the president of seven-year-old Homeland Federal Mortgage in Tulsa, Okla., issued a statement indicating that the company closed in December and blaming federal initiatives that favor big banks, Tulsa World reported. The mortgage broker, who is also a Republican state senator, reportedly threw seven-employee Homeland and several other businesses into bankruptcy.

Employees of Wilmington, N.C.-based AAXA Mortgage, which closed after an acquisition deal by an Illinois bank recently fell apart, will now work for Great Western Federal Savings Bank, WWAY-TV reported. Operating as the Wilmington branch of the bank, AAXA's chief executive officer,Greg Gianoplus, will serve as a Great Western branch manager. has tracked 27 mortgage-related closings so far in 2010.
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