Mortgage Daily Logo
mortgage news from industry experts

Abandoned Commitments Litigated

Abandoned Commitments Litigated

Coast Bank sues Opteum

July 20, 2007


photo of Patrick Crowley
Under pressure from borrowers, shareholders and regulators, a Florida bank has filed a federal lawsuit against a company that allegedly reneged on a deal to purchase $20 million in mortgage loans.In the lawsuit, filed in U.S. District Court in Florida, Coast Bank of Florida claims Opteum Financial Services LLC backed out on a deal to buy 51 loans. The bank is seeking in excess of $15,000 in damages.

Opteum could not be reached for comment and has not issued any public statements on the lawsuit, but in April it announced it would abandon its correspondent and wholesale origination channels. The Vero Beach, Fla.-based company attributed the failure to secondary market deterioration and weak consumer demand.

Coast Bank claims that Opteum broke a contract to purchase the loans, which “have now come due and have not been converted or purchased.”

As part of the lawsuit, Coast Bank has filed several letters indicating Opteum pledges to buy loans.

“Please let this letter serve as notice that upon completion of construction, Opteum Financial Services will unconditionally purchase from Coast Bank the above described loan file for the total outstanding balance at such time,” says a letter dated December of 2005 and signed by an Opteum senior vice president.

This has been a troubled year for the Bradenton, Fla., based bank.

In January the company revealed it made 482 loans to borrowers whose homes were built by a bankrupt builder. The bad loans totaled $110 million, according to filings.

That prompted a rash of lawsuits from investors dissatisfied with the bank’s management and claiming Coast executives should have known they were dealing with a builder facing ruin.

A lawsuit has been filed by 175 borrowers who claim Coast was operating a flipping scam. The borrowers say the former head of the bank’s residential loan department “concocted a scheme by which individual investors would be solicited to purchase residential lot/home packages in Florida with the promise of no money down … with the intent that the completed packages would be sold at a substantial profit before the issuance of the certificate of occupancy for the home.”

Instead, the borrowers say they have been left with unimproved lots and unfinished homes in Sarasota County that have been tied up in the builder’s bankruptcy.

In May, Coast Bank agreed to settle a cease and desist order issued by Federal Deposit Insurance Corp. and the Florida Office of Financial Regulation. The bank said in documents filed with the Securities and Exchange Commission and in public statements that it “took corrective measures in a number of areas,” including replacing Brian F. Grimes as president and CEO.

The cease and desist order was issued following a late January examination in which regulators discovered problems with Coast Bank’s residential construction loan portfolio.

“From the day we discovered issues regarding our residential construction loan program, our management team has worked pro-actively with” state and federal regulators, James Toomey, chairman of the bank’s publicly traded holding company — Coast Financial Holdings Inc. — said in a statement.

“We have already addressed a large number of the corrective actions outlined in the (cease and desist order) and several of these issues have already been resolved,” Toomey said.

next story

back to current headlines

Popular posts

How Long Does It Take to Refinance a Mortgage
How Long Does It Take to Refinance a Mortgage

So, you’re interested in refinancing your mortgage. Maybe you want some extra capital to do that home project you’ve always dreamed of, interest rates are nearing record lows, or you want to start consolidating debt. Regardless of the motivation behind the refinance,...

How Does Refinancing a Mortgage Work
How Does Refinancing a Mortgage Work

A home purchase is considered an investment, and a robust one at that. Savvy owners are constantly looking for new ways to reduce debt, save money, pay less in interest, and ultimately build equity. Refinancing is one way to leverage your investment and do just that....

What Does It Mean to Refinance Your Home
What Does It Mean to Refinance Your Home

You can think of refinancing your mortgage as a debt redo. Essentially, you’ll swap out the existing loan for a new one - ideally with better terms and conditions. Only this time it could help you save money on high mortgage payments, rather than just borrow it....

Setting up the Utilities in My New House
Setting up the Utilities in My New House

All the tedious, time-consuming home closing documents have been signed, sealed, and delivered. Your belongings are packed into what seems like a million boxes and you have a solid plan to haul all your existing furniture to the new place. Just as your boxes and...

When Is My First Mortgage Payment Due?
When Is My First Mortgage Payment Due?

Navigating your way through a brand new mortgage loan can be a difficult task, especially for first time homeowners. After handing over a large sum of money for the down payment and closing costs, it’s important to pay attention to the timing of your first mortgage...


Don’t worry, we don’t spam

calculate your monthly mortgage payment

Related Topics

Helpful Links

Daily mortgage rate trends

Best mortgage lenders

First-time homebuyers programs by state

Loan limits by state

Types of mortgages

APR vs interest rate

Understanding PMI

Related Posts