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Banks Face Orders, Contraction & Expansion

Recent mergers and corporate activity

February 26, 2008

By SAM GARCIA


The wholesale lending unit of one bank is closing down while another bank is expanding its presence in the Southeast. And while a government insurance fund takes actions against a number of banks, a ratings agency is taking actions against bond insurers.

Standard & Poor's Ratings Services announced that an unprecedented level of mortgage market deterioration has taken its toll on monoline financial guarantors and that it has taken action on those with significant nonprime exposure.

Among insurers downgraded by S&P were Financial Guaranty Insurance Co., which has seen its potential losses recently increase, and XL Capital Assurance Inc. and XL Financial Assurance Ltd. In addition, the ratings of the two companies remain on CreditWatch.

The ratings of MBIA Insurance Corp., Ambac Assurance Corp. and CIFG Guaranty were affirmed but remain on CreditWatch, S&P said. The affirmations reflect the successful management of capital to pay claims.

The Federal Deposit Insurance Corporation announced cease and desist orders were issued against Hometown Bank of Villa Rica, in Villa Rica, Ga.; Cleveland Community Bank, S.S.B., in Cleveland, Miss.; and Nevada Bank and Trust Company, in Caliente, Nev. The agency issued removal and prohibition orders against Alliance Bank, in New Ulm, Minn., and Jane L. Turbes.

Civil money penalties were issued against Cathay Bank in Los Angeles; Minnwest Bank Luverne, in Luverne, Minn.; Sun Security Bank, in Ellington, Mo.; and Northwest Savings Bank, in Warren, Pa., FDIC reported. A cease and desist order was terminated against Doral Bank, in Catano, Puerto Rico.

Assured Guaranty Corp., Financial Security Assurance Inc. and Radian Asset Assurance were considered not to be at risk because they have little nonprime exposure.

The American Bankers Association announced an expanded alliance with Freddie Mac for its community bank members. The expansion will help banks improve cash executions, increase access to critical services and better educate their workforces about Freddie's products and technology.

Freddie said the banks will now have access to branded Web sites that include its Loan Prospector automated underwriting system, private label subservicing and outsourced investor accounting. In addition, REO management services are available to help the banks quickly dispose of REO inventory.

"Today's announcement with the ABA will accommodate its members' changing needs with a proven package of business services and residential financing options," Freddie executive Iliana Ghanem said in the statement.

The wholesale division of Resource Mortgage ended operations last month. Resource said its stopped taking new wholesale business on Jan. 11 but would continue to originate retail loans.

Resource, a division of Resource Bank which is owned by Fulton Financial, said the decision to exit broker originations was tough but necessary.

"Rapidly changing conditions in the mortgage markets have resulted in significant challenges in the industry," the Virginia Beach, Va.-based company said on its Web site. "Due to the present volatility, combined with a continued downturn in the market, requires us to take additional action."

An acquisition of Alabama National BanCorporation was completed by RBC Centura Banks Inc., according to an announcement from the Royal Bank of Canada subsidiary. Alabama National operates 10 subsidiary banks with 103 locations.

The network of Southeast banks will be re-branded as RBC Bank as part of a company wide name change slated to begin in April. The acquisition brings to 430 the number of banking locations and 5,000 the number of employees at RBC Centura.

"By doubling our presence in both Alabama and Florida as well as adding 13 locations in Georgia, the acquisition of ANB is a logical step for RBC Centura to gain market share in the Southeast," RBC Centura Chief Executive Officer Scott Custer said in the announcement.


Sam Garcia worked in mortgage lending for twenty years prior to becoming publisher of MortgageDaily.com.

e-mail: [email protected]


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



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News about wholesale lenders, correspondent lenders and wholesale mortgage lending programs. Alt-A, subprime and other niche loan programs. Lawsuits between wholesalers and brokers.



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