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

Mortgage Casualties Could Fall in 2010

Recent mortgage-related businesses to fail or close

Nov. 14, 2010

By staff

Losses from the collapse of three banks on Friday are expected to exceed $0.2 billion. The number of federally insured banks to fail this year has already surpassed 2009's full-year tally. But a bigger decline in the number of non-bank mortgage-related failures and closings has made it possible that this year will see an overall decrease in mortgage-related casualties.

Officials with the Georgia Department of Banking and Finance and agents of the Federal Deposit Insurance Corp. walked into Tifton Banking Co. on Friday afternoon and seized the six-year-old bank. The Tifton, Ga., firm had just 15 employees, $142 million in deposits and $144 million in assets -- including $26 million in home loans, $29 million in commercial mortgages and $26 million in commercial-and-development loans.

Georgia also seized Darby Bank & Trust Co. and, as with Tifton, handed it over to over to the FDIC as receiver. Darby employed 141 people, was founded in 1927 and had its headquarters in Vidalia, Ga. As of Sept. 30, deposits totaled $588 million, while $655 million in assets included $124 million in residential loans, $156 million in commercial real estate loans and $104 million in C&D loans.

An FDIC cease-and-desist order was issued in December 2009 against Darby, while the bank faced an FDIC civil money penalty in 2008.

Ameris Bank stepped in to acquire the two Georgia institutions. The FDIC agreed to a loss-sharing arrangement on $560 million of the assets -- pushing estimated Deposit Insurance Fund losses to $25 million on Tifton and $136 million on Darby.

Later in the day, the Superintendent of the Arizona Department of Financial Institutions seized Copper Star Bank and appointed the FDIC as receiver. The Scottsdale-based bank was established a decade ago. It had around 47 employees at the time of its demise, and had been hit with an FDIC cease-and-desist order in January.

"DFI and the FDIC have been coordinating the examination and supervision of this bank
for months" Arizona said in a news release. "DFI sought the receivership because the bank's financial condition was unsafe and unsound."

Stearns Bank, N.A., agreed to assume all of Copper Star's $190 million in deposits for a 1 percent premium. Stearns additionally acquired all of the failed bank's $204 million in assets including $25 million in consumer mortgages, $92 million in commercial mortgages and $33 million in C&D holdings. But the deal required the FDIC to share losses on $165 million of the assets.

The failure of Copper Star is expected to cost the FDIC $44 million.

In all, 146 FDIC-insured banks have failed so far this year -- more than during all of 2009 when just 140 banking institutions failed. Non-bank mortgage-related closings, though, have tumbled to just 18 this year from 69 for all of last year.

Including banks, credit unions and non-bank mortgage firms -- Mortgage Daily has tracked the closing or failure of 184 mortgage-related businesses so far during 2010. The level of Mortgage Graveyard activity thus far suggests the full-year 2010 total could end up lower than 2009's total.

Also on Friday, the National Credit Union Administration announced that Members United Bridge Corporate
Federal Credit Union and Southwest Bridge Corporate Federal Credit Union were created to assume the operations of Members United Corporate and Southwest Corporate. Bridge institutions are chartered to continue serving member credit unions and acquire the "good" assets of failed corporate credit unions.

The NCUA explained that the bridge credit unions will offer no new services, maintain an identical field of membership and provide new loans primarily for settlement purposes.

In 2007, Credit-Based Asset Servicing and Securitization LLC -- or C-BASS -- disclosed "an unprecedented amount of margin calls from" its lenders. The disclosure was prompted  by statements from MGIC Investment Corp., which had $516 invested in C-BASS LLC, and Radian Group Inc., which had a $518 million investment, indicating their 100 percent interest could be completely wiped out.

On Friday, C-BASS filed for bankruptcy protection in U.S. Bankruptcy Court for the Southern District of New York, Bloomberg reported. Listed debts exceeded $1.0 billion and assets were less than $0.1 billion.

In re Credit-Based Asset Servicing & Securitization LLC
Case No. 10-16040, Nov. 12, 2010 (U.S. Bankruptcy Court, Southern District of New York).

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