Mortgage Daily

Published On: October 19, 2009

Although multiple bank failures have become a regular weekly occurrence this year, only one financial institution has failed during the past two weeks. But the current count, nearly 100 so far in 2009, is expected by one analyst to jump by more than 500 during the next 12 months. Meanwhile, two mortgage firms have ended operations.

The California Department of Financial Institutions Friday seized San Joaquin Bank and shut it down. Inadequate capital and liquidity were cited in a news statement by the state.

“The department of financial institutions had ordered it to increase its capital reserves to a safe and sound level, but efforts by the bank to do so were unsuccessful,” the state said.

San Joaquin Bank entered a formal agreement with the state regulator and the Federal Reserve Board on April 7.

The Bakersfield, Calif.-based institution had total assets of $775 million and total deposits of approximately $631 million as of Sept. 29, according to the Federal Deposit Insurance Corporation — which was named receiver. All of the deposits were assumed by Citizens Business Bank at par. Citizens also agreed to acquire all of the failed institution’s assets, with the FDIC sharing in losses on $683 million of the assets.

The FDIC expects its Deposit Insurance Fund to be depleted by $103 million as a result of San Joaquin Bank’s demise — the 99th FDIC-insured failure so far this year.

The closing of San Joaquin Bank marks the only bank failure during the past two weeks, highly contrasting the rapid pace of failures this year that peaked the week ended July 24 — when seven federally insured banks, three wholesale lenders and a net branch operation were shut down.

Anthony Polini, senior vice president of financial services at Raymond James & Associates Equity, predicted in a report published this month by The Wall Street Transcript that more than 500 bank failures could occur over the next 12 months. The 130-page report was based on 21 interviews with equity analysts, money managers and chief executive officers of publicly traded companies.

“I think there are 500 or 600 more to come,” Polini was quoted as saying.

Capmark Financial Group Inc. is reportedly on the verge of a bankruptcy filing, according to Reuters. The the Horsham, Pa.-based company warned in April about its ability to continue as a going concern, while a deal was struck in September with Berkadia III LLC — a newly formed venture between Berkshire Hathaway and Leucadia National Corp. — for an “asset put agreement” that gives Capmark the right to sell its mortgage banking and servicing operations in North America for nearly $0.5 billion.

Capmark Finance Inc., a commercial mortgage servicing subsidiary of the beleaguered firm, was ranked as the third-biggest commercial mortgage servicer in the second quarter by the Mortgage Bankers Association.

Northeast Mortgage Corp. President Brian P. Rogerson notified employees in an Oct. 6 e-mail that the 13-year-old firm had halted originations and surrendered licenses in Arizona and Connecticut, according to a copy of the message published by Mortgage Lender Implode-O-Meter. Rogerson explained that the problems began with the 2006 “discovery of the actions of our previous controller,” putting the firm “in a constant state of survival vs. growth.”

The message rambled on about an “IRS obligation,” Bank of America’s failure to pay $0.5 million in earnings and how HUD’s increased net worth requirements based on 2008 volume led to the suspension of its warehouse line. Northeast, which reportedly employed as many as 100 people at one point, operated without a warehouse line for three months. A potential re-establishment of the warehouse line in September fell apart because one of the company’s shareholders refused to sign a personal guarantee.

Rogerson noted in the e-mail that he had accepted a position with a “local mortgage banking firm licensed in over 30 states including both Connecticut and Arizona” — reportedly The Lending Co.

Security Mortgage Corp. is no longer in business, Implode-O-Meter reported. Originations had been as high as $20 million a month at the Chandler, Ariz.-based company.

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