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

Another Georgia Bank Goes Down

Recent mortgage-related businesses to close

March 26, 2012

By staff

Including one of two bank failures last week, more than a quarter of all federally insured banks to fail this year have been in Georgia. In all, four financial institutions were closed down last week. Meanwhile, a third-party lender has re-entered a market that it recently exited.

Covenant Bank & Trust was seized Friday by the Georgia Department of Banking and Finance pursuant to the Official Code of Georgia, Section 7-1-150(a), which authorizes such actions whenever a state-chartered financial institution is either insolvent or operating in an unsafe or unsound condition to transact its business; is operating in violation of a court order, statute, rule or regulation; or requests that the state takes it over.

An order was obtained by the department from the Superior Court of Walker County enabling the Federal Deposit Insurance Corp. to be named as receiver.

The Rock Spring, Ga., bank had $91 million in total deposits as of Dec. 31, 2011, and $96 million in total assets including $15 million in home loans, $29 million in commercial real estate loans and $15 million in construction-and-development loans. It was hit with an FDIC cease-and-desist order in April 2010. The six-year-old firm employed around 21 people as of its demise.

All of Covenant Bank's deposits were assumed by Stearns Bank, N.A., which also acquired its assets with the FDIC agreeing to a loss-sharing arrangement.

The cost to the Deposit Insurance fund is estimated at $32 million -- a huge amount compared to the relatively small size of the bank. It was the fourth bank failure so far this year in Georgia.

After that, the Illinois Department of Financial and Professional Regulation - Division of Banking closed down Premier Bank in Wilmette, Ill.

Premier was founded in February 2000 and had 23 employees. In September 2010, the FDIC issued a cease-and-desist order against the firm.

Residential mortgages on its books finished last year at $9 million, while commercial mortgages totaled $102 million and C&D holdings were $7 million.

All of Premier's $199 in total deposits were assumed by the International Bank of Chicago, which also acquired all of its $269 million in total assets.

The FDIC expects related losses to total $64 million.

Premier was the 15th FDIC-insured bank failure this year.

The FDIC executed 272 shared-loss agreements between November 2008 and September 2001, according to a report from the regulator's inspector general. Such agreements were re-introduced during the recent financial crisis, and the FDIC devoted high-level management attention to the quickly expanding program.

"As a result of these efforts, the FDIC has established a number of controls and processes to monitor and ensure that acquiring institutions comply with the terms and conditions of the shared-loss agreements," the report said. "We also found that the shared-loss agreements program is continuing to mature, as evidenced by the recent finalization of policies and procedures, initiation of training programs, strengthened acquiring institutions compliance monitoring efforts, and implementation of data resources to manage program data."

The Colorado Division of Financial Services closed down Saguache County Credit Union on Friday and appointed the National Credit Union Administration receiver. Aventa Credit union acquired the $17 million in assets of the Moffat, Colo., credit union and took over its 3,185 members. Saguache, which was chartered in 1996, served people who lived in Saguache, Rio Grande and Alamosa counties that belonged to a cooperative.

Next, the California Department of Financial Institutions took over Telesis Community Credit Union and handed it over to NCUA as conservator. A declining financial condition was cited for the credit union's demise.

Telesis was chartered in 1965 to serve various employer groups and individuals who live, work, worship or go to school in California's San Fernando Valley, Santa Clarita Valley or Ventura County. Assets exceeded $318 million, while membership was more than 37,600.

It was the sixth credit union failure tracked so far this year by Mortgage Daily and the 25th mortgage-related business to close so far during 2012.

A day after Massachusetts Attorney General Martha Coakley filed a lawsuit on Dec. 2, 2011, against some of the nation's biggest mortgage servicers, GMAC Mortgage said it would stop originating Massachusetts business through mortgage brokers and correspondent lenders. The company said it made the move "because recent developments have led mortgage lending in Massachusetts to no longer be viable."

A week later, Coakley asked the chairmen of two congressional committees to investigate GMAC for "pursuing illegal foreclosures and deceptive loan servicing."

But GMAC has since had a change of heart and earlier this month said it had resumed originations in the state with some select correspondents and mortgage brokers.

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