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Regulation Under Fire

Recent bank and mortgage regulatory actions

January 14, 2009

By MortgageDaily.com staff

As regulatory orders continued to be hurled at financial institutions, a state audit identified shortfalls with Nevada mortgage regulators and a federal audit called the U.S. financial regulatory system fragmented, outdated and inadequate.

The Federal Deposit Insurance Corporation announced in December that cease-and-desist orders were issued against the following companies.

Bank Location Date
Order #
Blue Ridge Savings Bank Inc. Asheville, N.C. Nov. 3 FDIC-08-293b
Community Bank of San Joaquin Stockton, Calif. Nov. 19 FDIC-08-302b
First Tuskegee Bank Tuskegee, Ala. Nov. 19 FDIC-08-159b
Franklin Bank, S.S.B. Houston Nov. 4 FDIC-08-297b
Mountain Commerce Bank Erwin, Tenn. Nov. 13 FDIC-08-213b
Pacific Valley Bank Salinas, Calif. Nov. 7 FDIC-08-235b
Silver Falls Bank Silverton, Ore. Nov. 25 FDIC-08-272b
State Bank of Park Rapids Park Rapids, Minn. Nov. 19 FDIC-08-107b

The FDIC issued civil money penalties against the following institutions.

Bank Location Date
Order # Amount
Central State Bank Clayton, Ill. Nov. 13 FDIC-08-089k $2,695
Citizens State Bank Cadott, Wis. Nov. 14 FDIC-07-268k $4,800
The Farmers Bank Frankfort, Ind. Nov. 14 FDIC-07-262k $8,450
Frontier Bank Everett, Wash. Nov. 17 FDIC-08-264k $48,895
State Bank of Newburg Newburg, Wis. Nov. 6 FDIC-07-264k $1,800
The RiverBank Wyoming, Minn. Nov. 21 FDIC-08-292k $3,750
Valley Bank Moline, Ill. Nov. 12 FDIC-07-113k $12,000
Willamette Valley Bank Salem, Ore. Nov. 26 FDIC-08-284k $4,900

A final order was issued by the FDIC against Hollis J. Leon on Nov. 20. Also in November, the FDIC terminated cease-and-desist orders against The Patterson Bank, in Patterson, Ga.; Indian Village Community Bank, in Gnadenhutten, Ohio; First BankAmericano, of Elizabeth, N.J.; and United Bank of Philadelphia.

The National Credit Union Administration issued orders prohibiting five individuals from participating in the affairs of any federally insured financial institution.

Those individuals were former Peoria Hiway Credit Union employee Adelle Herron; former Niagara Falls Memorial Medical Center Federal Credit Union employee Lori A. Kloss; former Georgia-Pacific Toledo Employee FCU employee Marcella G. Miller; Judy N. Putman-Speight; and former State Employees Credit Union employee Winston Louis Smith.

The NYSE Alternext US LLC has notified Hanover Capital Mortgage Holdings Inc. that an extension has been granted until Feb. 27 for the real estate investment trust to become compliant with continued listing standards. An extension was previously granted until Dec. 31, 2008.

Edison, N.J.-based Hanover was originally notified on April 8, 2008, that its equity fell below the $2 million minimum level and that it had a net loss in two of the prior three fiscal years, also a violation.

BankUnited Financial Corp. said last month that it received a non-compliance notice from the Nasdaq Stock Market because it didn't file its 10-K annual report for the fiscal year ended Sept. 30, 2008, on time with the Securities and Exchange Commission. The company has until Feb. 17 to submit a plan that gets it back in compliance.

Coral Gables, Fla.-based BankUnited said it expects to regain compliance with a 10-K filing this month -- though it is prepared to submit a plan by the deadline if it is unable to make the filing before then.

A report released today from the Government Accountability Office said the 150-year-old U.S. financial regulatory system is a fragmented and complex arrangement of federal and state regulators that is incapable of keeping up with major market developments during recent decades. A complex web of financial companies, problems created by less-regulated firms and the complexity of today's investment products all exacerbate the problem. Global convergence was also listed as a factor.

"Today, almost a dozen federal regulatory agencies, numerous self-regulatory organizations and hundreds of state financial regulatory agencies share responsibility for overseeing the financial services industry," the report said. "As the nation finds itself in the midst of one of the worst financial crises ever, it has become apparent that the regulatory system is ill-suited to meet the nation's needs in the 21st century."

GAO outlined a framework with nine characteristics that should be reflected in an overhaul of the financial regulatory system.

Nevada's Division of Mortgage Lending was criticized in a state audit for failing to perform annual licensee examinations during 2007. The report was released last month by the audit division of the state's Legislative Counsel Bureau. The division was also criticized for failing to create procedures for scheduling examinations using a risk-based approach and for not having a functional hearings process.

In addition, the report said that the division did too little to collect around $1.5 million in unpaid assessments, fees and fines. The division has only filled one examiner position even though 11 were authorized by the legislature.

The audit recommended a 60-day corrective action plan be presented from the division by March 11.

Mortgage Lawsuits News | Mortgage Litigation Index
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