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Banks Face Mergers, Regulatory Orders

A new real estate investment trust is being launched, an order was issued against a bank officer accused of mortgage fraud and Fannie Mae and Freddie Mac faced grand jury subpoenas and securities regulatory inquiries. Meanwhile, dozens of other banks faced a host of regulatory orders and a growing number of institutions face mergers.

But first, Tennessee Valley Financial Holdings Inc. reported last week in a Securities and Exchange Commission filing that its subsidiary, TnBank of Oak Ridge, holds $2.2 million in preferred stock of the government sponsored housing enterprises. But even if those holdings become worthless, TnBank will remain well-capitalized.

Franklin Bank Corp. was granted a reprieve on its NASDAQ Stock Market listing. A notice it said it received from the Nasdaq Listing and Hearing Review Council granted the Houston-based firm a stay on its continued listing while the council evaluates the request and Franklin regains compliance.

Michael A. Gerber has been named Chief Executive Officer of Farmer Mac, a new release Wednesday said. Gerber replaces Henry D. Edelman, who will continue to serve as CEO of Farm Credit of Western New York.

A consent order of prohibition was issued against Donald W. Linville by the Federal Reserve Board, an announcement Monday said. The order was based on alleged alterations of appraisals, loan applications and guaranty records — which led to substantial bank losses. Linville, who didn’t admit to any of the allegations, was a former senior vice president for commercial real estate lending at Compass Bank in Birmingham, Ala.

Alleged violations of National Flood Insurance Act rules led to a Fed consent order of assessment of a $2,750 civil money penalty against Bank of Romney, Romney, W.V., a Fed statement Monday said.

The Federal Deposit Insurance Corporation issued cease-and-desist orders against Parkway Bank, Rogers, Ariz.; Mizrahi Tefahot Bank Ltd, Los Angeles; Pan American Bank, Los Angeles; McClave State Bank, McClave, Colo.; Strategic Capital Bank, Champaign, Ill.; Chestatee State Bank, Dawsonville, Ga.; Lake Community Bank, Long Lake, Minn.; The Home Savings and Loan Company of Youngstown, Ohio; Libertad Bank, SSB, Austin, Texas; Sallie Mae Bank, Murray, Utah; and Bank Reale, Pasco, Wash.

Removal-and-prohibition orders were issued by the FDIC against Bank of the West, San Francisco; First State Bank of North Dakota, Arthur, N.D.; Branch Banking and Trust Company of South Carolina, Greenville, S.C.; Farmers State Bank, Center, Texas; and Texas First State Bank, Riesel, Texas.

The FDIC issued civil money penalties against Evabank, Eva, Ala.; Savings Bank of Mendocino County, Ukiah, Calif.; Lafayette Community Bank, Lafayette, Ind.; TriCentury Bank, Simpson, Kan.; Saco & Biddeford Savings Institution, Saco, Maine; Stoughton Co-operative Bank, Stoughton, Mass.; and Cambridge State Bank, Cambridge, Wis.

Citrus Bank, N.A., in Vero Beach, Fla., received a voluntary termination of insurance from the FDIC.

FDIC terminated cease-and-desist orders against Morris Building and Loan, S.B., Morris, Ill.; State Bank & Trust Co., Harrodsburg, Ky.; First State Bank of Kensington, Kensington, Minn.; The Greene County Bank, Strafford, Mo.; and Twin City Bank, Longview, Wash.

An agreement between the Federal Reserve Bank of San Francisco and Vineyard National Bancorp, Corona, Calif., calls for the bank to conserve capital and consult with the Fed before it makes any changes to its board or management. The bank is required to report back to the Fed in 60 days.

The parent of Beazer Mortgage Corp. — which is under investigation by the U.S. Attorney’s Office in the Western District of North Carolina, other state agencies and federal agencies — said last week that it settled an SEC investigation and consented to a cease-and-desist order. The Atlanta-based company didn’t admit to doing anything wrong, but the mortgage unit was investigated last year for potential fraudulent lending practices involving FHA-insured and other mortgages.

Beazer Mortgage shut down in February.

Fannie and Freddie both disclosed federal grand jury subpoenas from the U.S. Attorney’s Office for the Southern District of New York. Freddie’s subpoena seeks documents for the period from January 2007 through the present. In addition, the SEC’s Staff of the Enforcement Division issued notices indicating that inquiries are being conducted and the secondary lenders should preserve documents.

Farmer Mac said its capital position was significantly improved from a $65 million capital infusion in the form of its non-voting senior preferred stock.

Directors and executive officers of Virginia Commerce Bancorp Inc. have purchased $25 million in its trust preferred securities. In addition, warrants for 1.5 million shares of common stock were issued to the purchasers. Another $25 million private offering is slated by the end of this month.

TowerGroup announced its research points to growing mergers and restructuring for the U.S. banking industry. But banks — which face less available market capital and greater regulation and transparency — will again focus on traditional banking services. TowerGroup warned that poorly performing loans at Washington Mutual Bank leaves JPMorgan Chase & Co. vulnerable to at least $19 billion in loan losses following its Sept. 25 acquisition of WaMu’s assets after the FDIC seized the Seattle-based thrift.

Washington Mutual Inc., the former parent of the bank, had seen its counterparty credit rating lowered by Standard & Poor’s Ratings Services the day before the bank failed.

TowerGroup sees another two to three national banks alongside Bank of America Corp. and the new Chase.

Wingspan Portfolio Advisors LLC has launched to help servicers convert non-performing loans into reperforming loans. The firm works with willing borrowers to restructure their mortgage to an affordable instrument. The company’s specialists earn at least half of their compensation from bringing a loans back to re-performing status.

“We have created a methodology that uses data and metrics to help us establish scenarios that offer hope to investors and borrowers alike, said Wingspan CEO and founder Steven Horne – an attorney who previously was employed by Fannie and Ocwen. “The ultimate value of a nonperforming mortgage does not depend exclusively on collateral value, but also on the borrower’s psychology.”

Genworth Financial Inc. announced Tuesday that it is looking at possibly selling its U.S. mortgage insurance business, which it said operates from a more sound financial position than any of its U.S. competitors. But while its AA-rated mortgage insurance business may be in the most competitive position, the future of mortgage insurance is overshadowing its other insurance businesses.

Volume at mortgage insurers is at its lowest level in nearly a decade, while new applications are the lowest on record and defaults are rising, according to August data from the Mortgage Insurance Companies of America.

Hanover Capital Mortgage Holdings Inc. said Tuesday that it has agreed to merge with JWH Holding Company LLC, parent of Walter Mortgage Co. The deal is projected to close early next year.

As part of the deal, JWH is being spun off from current parent Walter Industries Inc.

The merged entity would operate with Hanover as the surviving corporation. The Tampa, Fla.-based company will be named Walter Investment Management Corp. and be structured as a REIT. A $5 million revolving credit line, priced at the three-month LIBOR plus 0.5 percent, has been provided as part of the REIT strategy.

The Federal Reserve Board said last week that it approved the acquisition of Parish National Corp., Covington, La., by Whitney Holding Corp., New Orleans, La.

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