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

Mortgage Firms Stop Lending as Bank Failures Plummet

Recent mortgage-related closings and failures

Dec. 13, 2013

By Mortgage Daily staff

Some mortgage lenders continue to abandon origination channels. Bank failures, however, have slowed to a trickle and are on track to come in lower than during any year since the financial crisis hit.

Federally insured bank failures, which had soared to 157 in 2010, are likely to number fewer than 25 this year -- a sign that the nation's banking crisis might have come to an end.

In just one week during October 2009, nine banks were seized by regulators and handed over to the Federal Deposit Insurance Corp. as receiver. At that point, bank failures were being announced almost every week.

But the pace has dwindled to just one bank failure during the past three months.

That bank, Bank of Jackson County, was closed on Oct. 30 by the Florida Office of Financial Regulation and handed over to the FDIC as receiver. Following a secret bidding process, First Federal Bank of Florida assumed the failed bank's $25 million in deposits and acquires $23 million of its $26 million in assets.

Graceville, Fla.-based Bank of Jackson County was founded in 1934 and had just 17 employees at the time of its failure. Residential assets were $8 million, while it owned $3 million in commercial real estate loans and $1 million in construction-and-land-development loans.

The FDIC estimates that Bank of Jackson County's failure, the 23rd this year, will cost the Deposit Insurance Fund $5 million.

The last time there were fewer than 25 bank failures was in 2007, when just three FDIC-insured failures occurred.

Among recent credit union failures is the Bagumbayan Credit Union, which was seized Thursday and thrown into conservatorship by the National Credit Union Administration, in cooperation with the Illinois Department of Financial and Professional Regulation.

The Chicago-based financial institution was chartered 1964 to serve members of the Bagumbayan community. Great Lakes Credit Union of North Chicago will service Bagumbayan's 44 members and their $55,140 in deposits as the NCUA works to resolve issues affecting its safety and soundness.

Last month, the Ohio Division of Financial Institutions liquidated the Polish Combatants Credit Union and appointed NCUA as liquidating agent. The state had determined that the Bedford, Ohio, credit union had no prospect for restoring viable operations.

Polish Combatants Credit Union was chartered in 1957 to serve Polish veterans of World War II and had only 52 members with $120,450 in assets at the time of its demise.

Also last month, 1,527-member Mayfair Federal Credit Union was taken over by the NCUA and placed into conservatorship. Mayfair was chartered in 1936 to serve low-income Philadelphia residents and has $14.3 million in assets.

So far this year, 16 credit unions have failed.

Pacific Mercantile Bank said Wednesday that its board of directors decided to exit consumer mortgage originations and terminate the operations of its mortgage banking division.

No new loan applications will be accepted after Dec. 19, though loans in process will continue to be serviced. Most of those loans will be closed within 75 days.

Mortgage operations at the Costa Mesa, Calif.-based company will be terminated on April 30.

"We made the strategic decision to exit the consumer mortgage origination business due to the operating performance of the unit and the bank's desire to focus on continuing to develop the commercial banking opportunity in its marketplace," said Steven K. Buster, who is president and chief executive officer of Pacific Mercantile and parent Pacific Mercantile Bancorp. "We believe that this change will support our mission of becoming a prominent Southern California business banking franchise."

Pacific Mercantile closed its wholesale lending division in 2005, reopened it in 2009 then closed it again in August 2012.

It entered a formal agreement with the Federal Reserve Bank of San Francisco in August 2010.

BB&T Corp. advised its correspondent lending clients that it would no longer accept their third-party originations beginning Jan.4, 2014. TPO loans locked by that date will be eligible for funding as long as they satisfy the pre-funding review process. Business will continue to be accepted from DBA entities as long as the correspondent owns 51 percent of the entity.

BB&T explained in the notice that it made the decision to stop accepting correspondent business originated by mortgage brokers due to concerns about Qualified Mortgage compliance and Fair Lending. It noted that while TPO quality has been "very good," the future regulatory landscape is challenging.

A BB&T spokesman said in a separate statement that "this particular segment represents a very small piece of our overall business in this space."

NewDay USA disclosed in September that it was exiting the reverse mortgage industry. The Fulton, Md.-based firm cited secondary market risk as the likes of Wells Fargo, Bank of America and MetLife have exited the sector. In addition, NewDay said a changing regulatory environment is expected to drag home-equity conversion mortgage originations down by 30 to 50 percent.

Data from Reverse Market Insight indicates that NewDay closed 655 HECMs during 2013.

A cease-and-desist order was issued in August by the West Virginia Division of Financial Institutions against Major Savings Inc., dba A Plus Family Home Mortgage, and its owner Mark Busack. In addition to ordering the Wheeling, W.V., mortgage broker to stop doing business, Busack's loan originator license was revoked.

The state cited alleged fraud and other dishonest mortgage activity uncovered in an investigation following a series of complaints. Another company owned by Busack fraudulently charged more than $30,000 in charges against one borrower's credit cards, according to the state.

Mortgage Daily has tracked 22 non-bank business closings this year.

In all, including banks, credit unions and non-banks -- Mortgage Daily has reported on 61 mortgage-related casualties so far in 2013.

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