Compared to a week earlier, bank-failure costs were down more than $2 billion. A failed deal between an Illinois bank and a North Carolina mortgage company will impact 100 employees and has the mortgage firm’s chief fuming.
The Minnesota Department of Commerce closed 1st American State Bank of Minnesota Friday and handed the failed institution over to the Federal Deposit Insurance Corporation as receiver. In April 2008, the FDIC issued a cease-and-desist order against 1st American.
The Hancock, Minn., bank was established in 1936 and had just six employees.
Community Development Bank, FSB, agreed to assumed all of the failed institution’s $16 million in deposits as of Dec. 31, 2009, at par and acquire all of its $18 million in assets — including less than $1 million in home loans, $2 million in commercial mortgages and $1 million in construction-and-land-development loans.
The FDIC agreed to a $12 million loss-sharing arrangement and expects that the Deposit Insurance Fund will be depleted by $3 million as a result of 1st American’s failure — the 16th FDIC-insured failure so far this year.
But compared to the previous week’s FDIC losses of more than $2.3 billion, the latest failure was miniscule.
| The collapse of a deal for an Illinois bank to acquire AAXA Mortgage will result in the company’s closing, according to an interview with AAXA Chief Executive Officer Greg Gianoplus by WWAY NewsChannel 3. Around a one-and-a-half years ago, the bank acquired a 51 percent interest in AAXA with the intention that the mortgage lender would originate loans under the bank’s national charter.
But the bank’s regulator would not accept AAXA as a bank subsidiary. “The bank blames the regulator, the regulator blames the bank,” Gianoplus angrily said, “and our company is the political pawn in this process.” The CEO noted that about 100 employees will be impacted. Around 60 of the impacted employees are in Wilmington, N.C., where the company is based. Gianoplus said that the company had hoped to add between 500 and 1,000 employees over the next five years if the deal had gone through. Including AAXA, MortgageDaily.com has tracked the closing of 22 mortgage-related operations during 2010.
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Greg Gianoplus during WWAY interview
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On Feb. 1, John Richard Varner — the former president of Mortgage One Corp. Corp. in Hesperia, Calif. — was sentenced to 13 years in prison for defrauding the U.S. Department of Housing and Urban Development on 905 loans, according to a U.S. Department of Justice news release. The loans were originated from 1997 until 2002 — when Mortgage One apparently closed down.
HUD lost $24 million in the scheme, which also involved M-1 Capital Corp. and has generated 15 convictions so far.
