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Financial Institution Failures Rise

Mortgage News


Thanks to a jump in bank failures and a continued worsening trend in the credit union sector, quarterly mortgage-related casualties rose to the highest level in a year. The forecast is for a decline in bank failures and an increase in credit union and non-bank closings.

As of June 30, Mortgage Daily had tracked 35 mortgage-related failures or closings so far during 2013.

The second-quarter portion of the total was 20, more than the 15 casualties tracked in the first quarter and the worst quarter of the past four.

However, the industry lost fewer businesses than the 25 reported for the second-quarter 2012.

Non-bank closings accounted for just two of the latest quarter’s casualties, down four from the first quarter.

But bank failures jumped to 12 from just four in the prior three-month period.

Credit unions that have closed down rose for the fourth consecutive quarter to six in the second quarter of this year.

Type
Q2 2013
Q1 2013
Q2 2012
Non-Bank Closings 2 6 9
Bank Failures (FDIC) 12 4 15
Credit Union Failures 6 5 1
Total 20 15 25

Recent graveyard activity includes Taupa Lithuanian Credit Union of Cleveland, which was liquidated by the Ohio Division of Financial Institutions as a result of a determination that the credit union had no prospect for restoring viable operations, according to a July 15 announcement. The National Credit Union Administration, which was appointed as liquidating agent, said that Taupa Lithuanian was chartered in 1984 and served 1,154 members who were part of the Lithuanian community in Cleveland and Northeast Ohio.

The NCUA said earlier this month that Autoland was sold to Mission Federal Credit Union. The credit union service organization was owned by Telesis Community Credit Union, which was liquidated in June 2012 by the California Department of Financial Institutions.

New Orleans-based Ochsner Clinic Federal Credit Union was liquidated on June 28 by the NCUA after the regulator determined that “the credit union was insolvent and had no prospect for restoring viable operations,” a news release said. ASI Federal Credit Union took over Ochsner’s 3,099 members and $9 million in assets.

A week earlier, PEF Federal Credit Union was thrown into conservatorship by the NCUA, which said that the move was made to protect the credit union’s financial stability and operations. The Highland Heights, Ohio-based financial institution was liquidated on July 1 after the NCUA determined that there was no prospect of PEF restoring viable operations. Best Reward Credit Union assumed some the 2,974 members of the 56-year-old credit union and some of its $31 million in assets.

A voluntary petition under Chapter 11 of the U.S. Bankruptcy Code was filed on May 2 by Precision Funding Group LLC in U.S. Bankruptcy Court for the District of New Jersey. The Cherry Hill, N.J.-based company, which also operated as PFG LLP, reported between $1 million and $10 million in liabilities owed to between 50 and 99 creditors. Assets were estimated at between $50,000 and $100,000.

The outlook for mortgage casualties isn’t good for non-banks and credit unions.

With 30-year fixed mortgage rates hovering more than a hundred basis points above the all-time low of 3.31 percent reached in the week ended Nov. 21, 2012, and potentially climbing higher — some non-bank lenders that have relied primarily on refinances over the past couple years could be forced out of business.

If credit union closings — which have risen each quarter since the second-quarter 2012, when there was just one — continue on their current trajectory, more casualties can be expected this quarter.

The bank failure forecast, however, is more optimistic.

Although bank failures surged in the latest quarter, the pace has recently slowed, with the last bank failure — Mountain National Bank in Sevierville, Tenn. — having occurred a month-and-a-half ago. The recent slowing suggests fewer bank failures in the third quarter.

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