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

Accredited Bankrupt, $3 Billion in Bank Failures

Silverton Bank, Citizens Community Bank seized

May 1, 2009

By staff

Losses from one of two financial institutions shut down by bank regulators today are projected to deplete the Deposit Insurance Fund by more than $1 billion. Meanwhile, one of the last remnants of the subprime mortgage sector filed for bankruptcy today.

The Office of the Comptroller of the Currency said today that it closed Silverton Bank, N.A. The Federal Deposit Insurance Corporation was appointed receiver.

The Atlanta-based bank, founded in 1986, did not deal with consumers. Instead, it provided correspondent banking services to 1,400 client banks located in 44 states. Among the services provided by its 412 employees were purchasing loans and selling loan participations.

"The OCC acted after finding that the bank had experienced substantial dissipation of assets and earnings due to unsafe and unsound practices," the statement said. "The OCC also found that the bank has incurred losses that have depleted most of its capital, and there is no reasonable prospect that the bank will become adequately capitalized without Federal assistance."

The OCC issued a cease-and-desist order against Silverton on Feb. 3, while the bank entered a formal agreement with the Federal Reserve Board on April 3.

A bridge bank, Silverton Bridge Bank, N.A., was created to take over the operations of failed institution. The bridge bank, which is being operated by the FDIC, will pose the least amount of disruption for customers, the FDIC said. Operational management has been contracted to TIB-The Independent BankersBank in Irving, Texas.

Deposits at Silverton were $3.3 billion as of today. All deposits are expected to be within the FDIC's insurance limits. Assets were $4.1 billion, including yearend 2008 holdings of $57 million in residential loans, $360 million in commercial mortgages and $1,009 million in construction-and-land-development loans.

The FDIC expects to take a whopping $1.3 billion hit from the failure of Silverton -- the 30th FDIC-insured institution to be closed by regulators this year.

No. 31, Citizens Community Bank, was seized today by the New Jersey Department of Banking and Insurance -- which called the collapse an isolated case.

The FDIC was also named receiver of the Ridgewood, N.J., institution.

"They have suffered from deficient management and poor asset quality," New Jersey said. "The department repeatedly demanded the bank's management take corrective action, but its failure to adequately address these problems made today's action necessary to protect consumers."

New Jersey and the FDIC issued parallel cease-and-desist orders in September 2008 against Citizens.

North Jersey Community Bank has agreed to assume all of the failed bank's $44 million in deposits as of Dec. 31, 2008 for an 0.67 percent premium. In addition, North Jersey agreed to acquire $12 million of Citizen's $45 million in assets.

The FDIC estimated its loss on Citizens will be $18 million.

Citing two people familiar with the matter, Bloomberg reported that American International Group Inc. is pondering whether to shut down its mortgage insurance subsidiary -- United Guaranty Corp.

Accredited Home Lenders Holding Co. and four affiliates filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code today, according to a statement by Kurtzman Carson Consultants. The San Diego based subprime subsidiary of Lone Star Funds filed the case in U.S. Bankruptcy Court for the District of Delaware.

Last month, Moody's Investors Service reduced Accredited's servicer quality rating for subprime loans to 'SQ4-' -- citing a recent sale of mortgage servicing rights, a "rightsizing" of the servicing platform and a reduction of the servicing staff. An uncertain future for the platform was also cited.

In August 2008, Accredited halted its wholesale operations.

The business had been revived in October 2007 when an affiliate of Lone Star Funds acquired Accredited and infused $100 million. The acquisition followed a lawsuit by Accredited to force the investment fund to complete the acquisition filed in August 2007 -- around the time that the subprime lender shut down its retail operation and closed 10 wholesale centers. It also eliminated half of its staff, resulting in over 1,000 layoffs.

Including the today's failures, has tracked the closing or collapse of 66 mortgage-related firms so far this year.

In re Accredited Home Lenders Holding Co.
Case No. 09-11516 (U.S. Bankruptcy Court, District of Delaware)

In re Accredited Home Lenders, Inc.
Case No. 09-11517 (U.S. Bankruptcy Court, District of Delaware)

In re Vendor Management Services, LLC d/b/a Inzura Settlement Services.
Case No. 09-11518 (U.S. Bankruptcy Court, District of Delaware)

Inzura Insurance Services, Inc.
Case No. 09-11519 (U.S. Bankruptcy Court, District of Delaware)

Windsor Management Co. d/b/a AHL Foreclosure Services Co..
Case No. 09-11520 (U.S. Bankruptcy Court, District of Delaware)

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