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Mortgage Compliance News | Mortgage Compliance Newsletter | Mortgage Regulations
News about complying with mortgage laws, rules and regulations.

Small Vs. Big Bank Regulation

Recent regulatory activity

May 7, 2009

By staff

A former banker has been banned by the Office of the Comptroller of the Currency from the banking business because of "severe" sexual harassment. As the head of the bank insurance fund discussed options for overseeing institutions deemed too big to fail, more than 50 small institutions faced regulatory actions -- including a number of final warnings.

Federal Deposit Insurance Corporation Chairman Sheila Bair testified Wednesday before the Committee on Banking, Housing and Urban Affairs, U.S. Senate. She said big gaps have existed in regulating institutions that posed significant systemic risk. She suggested the creation of a systemic risk council that includes the U.S. Department of the Treasury, the FDIC, the Federal Reserve Board and the Securities and Exchange Commission.

Bair said regulators must have the authority to quickly dissolve entities that are deemed too big to fail. False investor security that the U.S. government wouldn't let Lehman Brothers fail led to the collapse of the commercial paper market.

Last week, Bair told the Economic Club of New York said the FDIC's resolution authority needs to be extended from banks to bank-holding companies -- which are generally integral parts of the banks that FDIC is attempting resolve. The conglomerates are currently forced to utilize the messy bankruptcy system when they fail -- a process that can harm the financial system.

"What's needed is a new way to unwind these big institutions," she said.

One way would be separating the failed entities into a "good bank" -- or a bridge bank -- and "bad bank." Stockholders and unsecured creditors would suffer the losses, while other systematically risky firms would fund some of the losses though assessments.

OCC announced last month a consent order with William W. Anderson Jr., a former executive with The First National Bank of Pontotoc in Pontotoc, Miss. Anderson is permanently banned from being involved with any federally insured depository institution.

OCC said Anderson "discriminated against female applicants for credit, female borrowers and female account holders by subjecting them to severe and pervasive sexual harassment in connection with real estate-related transactions and other credit transactions." His case was the first prohibition order based on violations of the Fair Housing Act and the Equal Credit Opportunity Act.

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

Name Former Employer Location Activity
Robin E. Anderson Advantage One Credit Union Morrison, Ill. Convicted of bank fraud and sentenced to 27 months in prison, three years of supervised probation and ordered to pay $337,216 in restitution.
Hong Kyu Chun Korean American Chamber of Commerce FCU Bronx, N.Y. Convicted of bank fraud and sentenced to six months house arrest, three years of supervised probation and ordered to pay $70,000 in restitution to the credit union.
Nora Costlow BMA Credit Union Mesquite, Texas Consented to entry of a Prohibition Order to avoid the time and cost of litigation.
Renee Gooden Empower Federal Credit Union Syracuse, N.Y. Was convicted of grand larceny and sentenced to four concurrent weekends in jail, five years of supervised release and ordered to pay $4,550 in restitution.
Leah Louise Krueger Reliant Federal Credit Union Casper, Wyo. Pled guilty to larceny and received a suspended sentence of six to eight years, which will be vacated provided 10 years of supervised probation is successfully completed. Krueger was order to pay $90,000 in restitution.
Nicola Graham-Perkins Silverado Credit Union Mountain View, Calif. Was convicted of grand theft and taking, damaging or destruction of property, and she was sentenced to nine months in jail and five years of supervised probation.

The Federal Reserve Board announced that written agreements have been executed with the following companies. In general, the companies are required to conserve capital, improve operations and report back on their progress. In some cases, management must be replaced.

Institution Location Regulator Date Docket No.
Bay National Corp. Lutherville, Md. Federal Reserve Bank of Richmond April 28 09-034-WA/RB-HC
Cooperative Bankshares Inc. Wilmington, N.C. Federal Reserve Bank of Richmond April 24 09-049-WA/RB-HC
Heritage Bank Topeka, Kan. Federal Reserve Bank of Kansas City April 22 09-047-WA/RB-SM
Hometown Bancshares Inc. Carthage, Mo. Federal Reserve Bank of Kansas City April 28 09-043-WA/RB-HC
K Capital Corp. Owings Mills, Md. Federal Reserve Bank of Richmond March 30 09-042-WA/RB-HC

On April 28, the fed terminated a March 20, 2007, cease-and-desist order against Cache Valley Banking Co. and Cache Valley Bank in Logan, Utah, a press release yesterday said.

The FDIC announced last week cease-and-desist orders against the following institutions. Such orders often precede the seizure of federally insured banks.

Bank Location Date Order No.
American Southern Bank Kennesaw, Ga. March 31 FDIC-08-366b
The Bank of Bonifay Bonifay, Fla. March 23 FDIC-08-325b
Brickwell Community Bank Woodbury, Minn. March 3 FDIC-08-332b
Century Bank of Kentucky Inc. Lawrenceburg , Ky. March 23 FDIC-08-262b
Columbia Community Bank Hillsboro, Ore. March 4 FDIC-09-084b
Cooperative Bank Wilmington, N.C. March 12 FDIC-09-053b
The Farmers Bank Lincoln, Neb. March 13 FDIC-09-060b
First Bank & Trust Brookings, S.D. Mach 26 FDIC-07-228b,
First State Bank Wilmot, S.D. March 3 FDIC-09-023b
Frontier Bank Everett, Wash. March 20 FDIC-09-080b
Heartland Bank Leawood, Ks. March 30 FDIC-08-342b
Horizon Bank Bellingham, Wash. March 3 FDIC-08-404b
Innovative Bank Oakland, Calif. March 3 FDIC-09-066b
K Bank Randallstown, Md. April 1 FDIC-09-029b
Mountain Pacific Bank Everett, Wash. March 5 FDIC-09-079b
Muskegon Commerce Bank Muskegon, Mich. March 12 FDIC-08-274b
Nexity Bank Birmingham, Ala. March 20 FDIC-09-011b
Nuestro Banco Raleigh, N.C. March 12 FDIC-09-006b
Pan American Bank Los Angeles March 23 FDIC-09-114b
The Riverbank Wyoming, Minn. March 11 FDIC-08-389b
Security Exchange Bank Marietta, Ga. March 10 FDIC-08-352b
State Bank of Aurora Aurora, Minn. March 19 FDIC-09-026b
Statewide Bank Covington, La. March 25 FDIC-08-369b

The FDIC issued the following civil money penalties.

Bank Location Date Amount Order No.
Bank of Luxemburg Luxemburg, Wis. March 17 $11,600 FDIC-08-289k
Banks of Wisconsin Kenosha, Wis. March 17 $4,000 FDIC-08-153k
Bedford Loan & Deposit Bank Bedford, Ky. March 17 $5,000 FDIC-08-279k
Farmers & Merchants Bank & Trust Marinette, Wis. March 17 $1,350 FDIC-08-170k
First Bank & Trust Brookings, S.D. March 26 $90,000 FDIC-07-228b
First State Bank Beaver City, Neb. March 5 $4,250 FDIC-09-007k
Mainstreet Bank Forest Lake, Minn. March 5 $2,200 FDIC-09-008k
Mutual Bank Harvey, Ill. March 17 $6,500 FDIC-08-224k
Oriental Bank and Trust San Juan, P.R. March 26 $10,000 FDIC-09-015k
Peoples Bank Elkhorn, Wis. March 4 $4,800 FDIC-08-081k
Temecula Valley Bank Temecula, Calif. March 9 $24,600 FDIC-09-069k
Union State Bank of Fargo Fargo, N.D. March 30 $2,000 FDIC-09-014k
Waldo State Bank Waldo, Wis. March 17 $3,990 FDIC-08-306k

Removal-and-prohibition orders were issued by the FDIC against Peoples Independent Bank in Boaz, Ala., and First Bank in West Des Moines, Iowa. Meanwhile, a final order was issued granting Gaby Cucu permission to apply to participate in the affairs of an insured depository institution, and orders terminating cease-and-desist orders were issued for Great Florida Bank in Miami; Cleveland Community Bank, S.S.B., Cleveland, Miss.; and Sherman County Bank in Loup City, Neb.

The New York Stock Exchange notified Flagstar Bancorp Inc. that it was again in compliance with the continued listing requirement that its average closing share price was at least $1 over a consecutive 30-trading-day period. The Troy, Mich.-based institution first fell out of compliance in December 2008. Shares of Flagstar are currently trading above $2.

MGIC Investment Corp. warned in its first-quarter earnings report that its shares could be delisted from the NYSE, which -- in addition to a $1 minimum share price -- requires a minimum average market capitalization of $25 million. MGIC shares trade near $5, while its market capitalization stands at $597 million.

In the Matter of: William W. Anderson, Jr. Former Vice President and Branch Manager The First National Bank of Pontotoc Pontotoc, Mississippi.
AA-EC-09-22, April 19, 2009 (
U.S. Department of the Treasury, Comptroller of the Currency).

Peoples Independent Bank, Boaz, Ala., against Timothy Sims.
FDIC-08-254e, March 16, 2009 (FDIC).

First Bank, West Des Moines, Iowa, against Belma A. Bejtovic.
, March 13, 2009 (FDIC).

Gaby Cucu Final Order
FDIC-08-341L, Feb. 28, 2009 (FDIC).

Great Florida Bank Terminating Order.
FDIC-06-183b, March 3, 2009 (FDIC).

Cleveland Community Bank, S.S.B., Terminating Order.
FDIC-07-203b, March 16, 2009 (FDIC).

Sherman County Bank Terminating Order.
FDIC-09-046b, March 24, 2009 (FDIC).

Political Mortgage News | Mortgage Laws
Mortgage people in politics. Political contributions by mortgage companies. Coverage of political support by lenders and executives. GSE lobbying and issues.

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Mortgage industry lawsuit news and mortgage litigation coverage. Stories about legal settlements, judgments and mortgage class actions.

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