Sept. 16, 2009
Written 10 a.m. EDT
WHEN WILL TAYLOR, BEAN ESCROWS BE PAID?: Homeowners with loans from Taylor, Bean & Whitaker are losing their property insurance at the height of hurricane season, and the lender has been uncooperative in resolving the situation, the FDIC says in a bankruptcy court filing.
"(T)here are potentially catastrophic consequences to the nearly 500,000 homeowners due to (Taylor, Bean & Whitaker's) failure to make payments" to insurance companies, "which could leave homeowners without insurance in the midst of the hurricane season," the FDIC said in an Aug. 28 court filing.
Taylor, Bean & Whitaker, or TBW, was the nation's 12th-largest mortgage lender when it abruptly closed its doors in early August amid a federal fraud investigation. Since then, hundreds of thousands of borrowers have had trouble finding out who they're supposed to make their mortgage payments to. Some homeowners have found that their August and September payments have not been cashed, so money has not been put into escrow set aside for taxes and insurance. Property insurance premiums, as well as property taxes, have gone unpaid since early August. Regulators say homeowners are losing their insurance coverage.
In the Aug. 28 motion, the FDIC told the bankruptcy court that, "while hundreds of thousands of homeowners continue to make their monthly mortgage payments, those payments are now sitting in limbo. No insurance payments are being made on the underlying properties in the midst of hurricane season and no property taxes are being paid. And of course no principal or interest payments are being made to the mortgage investors. In certain instances, some homeowners have already begun to receive notices of overdue real estate taxes while (TBW) has been inundated with numerous inquiries and complaints from homeowners. This situation is intolerable and demands immediate emergency relief."
That relief might not arrive until sometime in October -- at the earliest.
The FDIC and other regulators and financial institutions complain in court documents that TBW has been stonewalling by refusing to disclose information that would allow borrowers' taxes and insurance to be paid. Finally, on Monday, the FDIC and TBW said in a court filing that they have reached an agreement: TBW will try to clarify who owes whom, and how much, by Oct. 30.
The FDIC and TBW "acknowledge and agree that the highest near-term priority is the reconciliation of borrower tax and insurance escrows," according to the agreement that awaits approval by Judge Jerry Funk of the U.S. Bankruptcy Court in Jacksonville, Fla. "Accordingly, the FDIC-Receiver and the Debtor will cooperate with each other and with successor servicers for Mortgage Investors, to provide information and take all steps necessary to assure the prompt payment of taxes, insurance premiums and related tax or insurance payments or refunds to borrowers as soon as reasonably possible."
In the past three weeks, almost half a million TBW borrowers have seen their mortgages transferred to other servicers. Depending on the type of loan and whether it was current or delinquent, loans were transferred either to Bank of America, Cenlar, Ocwen or Saxon. Those borrowers are finding that their September payments are being handled promptly and correctly, even as their August payments exist in limbo, uncashed and uncredited.
Another 35,000 borrowers are in an even murkier situation. Their loans were owned by Colonial Bank, a now-closed Alabama institution that had close ties to TBW. (Colonial was raided by federal agents on Aug. 3, while other agents raided TBW's offices simultaneously in Ocala, Fla.)
The Colonial-owned loans appear to mostly be alt-A mortgages or loans that had not yet been securitized and sold. In Monday's court filing, TBW agreed to transfer the servicing of those loans by Oct. 1 to a company called RoundPoint.
Meanwhile, the FDIC holds about 50,000 mortgage payments that are supposed to be deposited into accounts at the now-defunct Colonial Bank. Under the agreement between the FDIC and TBW, the FDIC will deliver those checks to TBW, which will resolve the accounting mess under the supervision of federal authorities who will be on site at TBW's offices.
The FDIC levels a bombshell accusation against TBW: The agency says it suspects that TBW pledged to sell $866 million in mortgage loans to "at least two mortgage investors." That would be like selling a house to two families and pocketing the proceeds from both sales before the buyers find out.
One mortgage investor, Bank of America, takes the FDIC's accusation seriously, and has asked the bankruptcy court to refrain from acting hastily because "it is possible that certain investor loans that are booked as belonging to (other investors) may in fact belong to Bank of America."