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



3 Bank Failures to Cost FDIC $0.5 Billion

Recent mortgage-related closings

Aug. 31, 2009

By Mortgage Daily staff


Estimated losses from the failure of three banks Friday were nearly a half billion dollars. Two of the failed institutions were more than a century old. This year's mortgage-related closings have already surpassed closings during all of 2008 and could reach the highest level in a decade. Meanwhile, two formerly large bank-holding companies filed for bankruptcy protection.

The Office of Thrift Supervision seized Bradford Bank and appointed the Federal Deposit Insurance receiver -- as is the case with all failures of federally insured banks. The OTS said that the Baltimore bank "was critically undercapitalized, and in an unsafe and unsound condition to conduct business.
"

The 106-year-old bank employed 88 people and had deposits of $383 million as of June 30, of which Manufacturers and Traders Trust Co. assumed all. M&T also acquired all of Bradford's $452 million in assets -- which included $212 in home loans, $58 million in commercial mortgages and $45 million in construction-and-land-development loans. The FDIC agreed to share in losses on $338 million in assets, bringing its expected cost in the failure to $97 million.

Next was Mainstreet Bank, which was shut down by the Minnesota Department of Commerce. Central Bank assumed the failed bank's $434 million in deposits as of June 30 for an 0.10 percent premium. It also acquired all of Mainstreet's $459 million in assets with the FDIC sharing in losses on $268 million. The FDIC's toll on Mainstreet is expected to hit $95 million.

Mainstreet operated from Forest Lake, Minn. Like Bradford, it was established in 1903. Headcount ended June at 96. At $97 million, nearly one-quarter of its assets were concentrated in commercial real estate. Residential holdings were $27 million, and construction-and-land-development loans amounted to $56 million. Mainstreet faced a $2,200 FDIC civil money penalty in March and an FDIC cease-and-desist order announced the prior month.

The third bank closing Friday was Affinity Bank, which was closed by the California Department of Financial Institutions. Pacific Western Bank assumed all of Affinity's $922 million in deposits as of July 10 and acquired all of its $1 billion in assets, including $615 million in commercial mortgages, $166 million in construction-and-land-development loans and just $24 million in one- to four-unit financing. The FDIC agreed to a loss-sharing arrangement on $934 million of the assets.

The Deposit Insurance Fund is projected to be depleted by $254 million as a result of the failure of the Ventura, Calif.-based institution, which was founded in 1982. The 147-employee firm faced an April 22 FDIC cease-and-desist order..

Including all three of Friday's bank failures, 84 FDIC-insured institutions have been closed down this year.

Feasterville, Pa.-base Free Choice Federal Credit Union was liquidated Friday by the National Credit Union Administration. Its 400 members' deposits will now be serviced by Trumark Financial Credit Union. Free Choice had just $326,000 in assets. The liquidation marks the eighth credit union failure this year.

Colonial BancGroup Inc. filed for Chapter 11 Bankruptcy in U.S. Bankruptcy Court for the Middle District of Alabama last week, according to published reports. Subsidiary Colonial Bank was seized by the Alabama State Banking Department on Aug. 4.

In a similar move, Guaranty Financial Group Inc. filed for Chapter 11 Bankruptcy protection in U.S. Bankruptcy Court for the Northern District of Texas. Subsidiary Guaranty Bank was closed by the OTS on Aug. 21.

East Brunswick, N.J.-based Worldwide Financial Resources Inc. ended operations after being hit with more than $20 million in repurchase requests and losing its wholesale relationship with CitiMortgage, the Mortgage Lender Implode-O-Meter reported. Worldwide reportedly originated $75 million last month and employed around 175 people, including more than 100 originators and around 75 corporate staff members.

MortgageDaily.com has tracked 140 mortgage-related closings this year -- more than the 124 tracked for all of last year and nearing the 165 recorded for 2007 -- the highest level of failures based on MortgageDaily.com data going back to 1998.


In re Colonial BancGroup Inc.
Case No. 09-32303, Aug. 25, 2009 (U.S. Bankruptcy Court, Middle District of Alabama).

In re Guaranty Financial Group Inc.
Aug. 27, 2009 (U.S. Bankruptcy Court for the Northern District of Texas)


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