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

BankUnited Failure is Biggest This Year

Investment funds form new BankUnited

May 22, 2009

By staff

On most Fridays lately, the Federal Deposit Insurance Corporation assembles its teams of FDIC agents and takes over banks in all parts of the country. On the rare occasions when larger institutions are involved -- like Washington Mutual Bank -- the agency takes control on a Thursday. The FDIC seized control of BankUnited, FSB, Thursday.

The Office of Thrift Supervision closed the Coral Gables, Fla.-based institution yesterday and appointed the FDIC as receiver, a news release yesterday said.

"BankUnited was critically undercapitalized and in an unsafe condition to conduct business," the OTS explained. "The bank reported losses of $1.2 billion in 2008 as loan quality continued to deteriorate."

BankUnited, FSB, was originally established in 1984 as United Savings Association and employed 1,083 people in 85 branches as of March 31. Its assets as of May 2 totaled $12.8 billion, including around $9.6 billion in residential loans -- of which $5.0 billion were option ARMs -- as of March 31. Commercial mortgage holdings were approximately $0.7 billion, while construction-and-land-development loans were just $0.4 billion.

The high concentration of residential loans was unusual for a failed institution; most have had a high concentration of construction-and-land-development loans.

"Ultimately, the combination of an excessive concentration in payment option-ARM loans with too many risk layers and rapidly deteriorating economic conditions overwhelmed BankUnited's capacity to absorb the losses on the portfolio," an OTS fact sheet said.

The OTS had issued a Stipulation and Consent to Prompt Corrective Action Directive on April 14, while a cease-and-desist order was issued in September 2008. In March, the company closed its wholesale lending business.

BankUnited Financial Corp., parent of the failed company, had warned in December that there was "substantial doubt about our ability to continue as a going concern."

An FDIC statement yesterday indicated a group of investors have formed a new federal savings bank dubbed BankUnited, which acquired the banking operations of the failed institution. The investors include WL Ross & Co. LLC; Carlyle Investment Management L.L.C.; Blackstone Capital Partners V L.P.; Centerbridge Capital Partners, L.P. LeFrak Organization Inc; The Wellcome Trust; Greenaap Investments Ltd.; and East Rock Endowment Fund.

The new BankUnited assumed $8.3 billion of the failed thrift's $8.6 billion in deposits as of May 2. Brokered deposits were excluded from the deal.

The new bank also assumed $12.7 billion in assets. The FDIC agreed to a loss-sharing arrangement on around $10.7 billion of the assets. The new bank's investors have agreed to re-capitalize BankUnited with $900 million in new capital.

John Kanas, who formerly headed North Fork Bank, will lead the new management team.

The new BankUnited is the largest independent bank in Florida, the FDIC said.

The failure of BankUnited is estimated to wind up costing the Deposit Insurance Fund $4.9 billion -- more than any other institution to fail this year. The latest failure brings to 34 the number of FDIC-insured institutions to fail this year. has tracked 72 mortgage-related closings this year.

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