A look at the stories on HousingWire’s weekend desk…with more coverage to come on bigger issues: Monday marks the year anniversary of the collapse of securities firm Lehman Brothers, an event widely considered the christening failure of the current crisis. The American Bankers Association, in light of the anniversary, launched a new page on its Web site dedicated to cataloging the event and providing outside resources for a comprehensive background of the year of crisis in the financial industry. The crisis continued Friday as regulators shut down another three banks, bringing the running total to 92 failures so far in 2009. Friday’s failures will cost the federal deposit insurance fund an estimated $2.02bn and puts more than $8bn of assets on the line for sale or disposition. The Office of the Comptroller of the Currency shut down Corus Bank and named the Federal Deposit Insurance Corp. receiver. The FDIC entered a purchase and assumption agreement with MB Financial Bank, which assumes all $7bn of the bank’s deposits at a 0.2% premium. It also assumes $3bn of Corus’ $7bn in assets–mainly cash and marketable securities. The FDIC retains the remaining assets for disposition and plans to sell “substantially all” of them in a private placement transaction that should occur within 30 days of Corus’ failure. All told, it will cost the FDIC’s deposit insurance fund an estimated $1.7bn. The Washington Department of Financial Institutions shut down Venture Bank. The FDIC entered an agreement with First-Citizens Bank & Trust Co., which assumes all $903m of the bank’s deposits and approximately $874m of the bank’s $970m of assets. The FDIC retains the remaining assets for later disposition and entered a loss-sharing agreement with First-Citizens on approximately $715m of the assets. The failure is estimated to cost the FDIC’s insurance fund $298m. The Minnesota Department of Commerce shut down Brickwell Community Bank. FDIC entered a purchase and assumption agreement with CorTrust Bank, which assumes all $63m of deposits at a 0.1% premium. It also purchases “essentially all” of the bank’s $72m of assets; it entered a loss-sharing agreement with the FDIC on $65m of Brickwell’s assets. The failure will cost the FDIC’s deposit insurance fund an estimated $22m. The FDIC, as part of its loss-sharing agreement with acquirers of failed banks, as of Friday is encouraging temporary reductions in mortgage payments — or “forbearance agreements” — for borrowers that are unemployed or underemployed. FDIC chairman Sheila Bair had this to say on the program:
“With more Americans suffering through unemployment or cuts in their paychecks, we believe it is crucial to offer a helping hand to avoid unnecessary and costly foreclosures. This is simply good business since foreclosure rarely benefits lenders and would cost the FDIC more money, not less. This is a win-win for the borrower, who can remain in his or her home while looking for a new job, and the acquiring institution, which continues to receive payments on the loan. Ultimately, by reducing losses under our loss-share agreements, this approach helps reduce losses to the FDIC as well.”
The FDIC is encouraging temporary forbearance plans, in which the loan payment is reduced to an affordable level, for at least six months in cases where unemployment or underemployment are the primary reason for default. The losses associated with lower monthly payments would not be covered under the loss-sharing agreement, but the losses arising from long-term modifications or ultimate foreclosures or short sales are covered. Two class-action law suits involving mortgage pass-through certificates are pending before the US southern district court of New York. The suits were filed on behalf of purchasers of mortgage pass-through certificates issued by Structured Asset Mortgage Investments II and Bear Stearns Asset-Backed Securities. The suits allege the use of misleading registration statements and other information between March 2006 and September 2007. The complaints claim registration statements included false information regarding underwriting standards, property appraisals, loan-to-value and debt-to-income ratios on underlying pools of mortgages. “As a result of these misstatements and omissions, the Certificates were secured by assets that had a much greater risk profile than represented in the Registration Statement, and the Nationally Recognized Statistical Ratings Organizations (the ‘NRSRO’ or ‘Ratings Agencies’) assigned superior credit ratings to the Certificates as a result of defendants’ failure to disclose the underwriting defects and appraisal manipulations,” according to a statement by the office of Cohen Milstein Sellers & Toll. Cohen Milstein represents the New Jersey Carpenters Health Fund in the case against Bear Stearns, while Couglin Stoia represents the Pension Trust Fund for Operating Engineers in the case against Structured Asset. Write to Diana Golobay.
