Acourt-approved foreclosure on parcels of a Riverside


Mello-Roos district known as Redhk was canceled last week


bondholders agreed to the propertowner's plan to remedy spcial


delinquencies and replenish debtrvice reserves.

RH Acquisition Co. of Los Angel, owner of the 24 parcels


represent 87% of the land in themmunity Facilities District

89-1 of the

Temecula Valley Unified School Dirict, settled with

bondholders last


Under the settlement, a majoritof Mello-Roos district


agreed to amend a 1990 administrave agreement between the


and its fiscal agent, Bank of Ameca National Trust and Savings


Bondholders received a cash paynt of $2.81 million from RH

Acquisition and also were reimburd for attorneys' fees and

other costs

connected with the called-off forlosure, said Todd Thakar, an

associate with

the Newport Beach office of Stradng, Yocca, Carlson & Rauth,


district's law firm.

The school system closed escrowriday on two school sites


from RH Acquisition for $1.95 milon, Thakar said. Those


contributed to the $2.81 millionsh payment. Earlier, on May

24, RH

Acquisition paid $565,000 of itslinquent special taxes.

The cash infusion replenished aeserve fund to its required


million level, and will cover RHquisition's special tax

payments for the

fiscal year that began July 1. Aincipal and interest payment

is due Sept.

1. The agreement also required RHcquisition to pay special tax

delinquencies for three previousscal years.

The Redhawk district's $12.8 miion of Series 1990 special

tax bonds

were used to build school buildin, reclaimed water facilities,

and day

care facilities. The district inially was expected to

accommodate 4,200

homes, but the pace of home buildg failed to meet


Financial struggles of past devopers caused the district to

have a

complicated land-ownership histor RH Acquisition acquired

title to the

undeveloped property last Septemb when it purchased a mortgage


held by Resolution Trust Corp.

Bondholder interest payments, d annually on March 1 and

Sept. 1,

were never missed despite the spe@@@155277200 3BKR JUL0194FTTC0001

WASHINGTON -- The government is on the brink of stripping deposit insurance from a small West Virginia savings bank that has refused to pay its full risk-based premium for the past 18 months.

Doolin Security Savings Bank in New Martinsville, W. Va., is challenging the way the Federal Deposit Insurance Corp. decides how much to charge banks for insurance.

The case, which is headed for the courts, could affect the way banks pay for deposit insurance in the future.

"What we are challenging is their whole scheme," said John C. Deal; an attorney with the Emens, Kegler, Brown, Hill & Ritter law firm in Columbus, Ohio. "If we are successful, they would have to amend the whole deposit insurance system."

Order Could Be Delayed

The FDIC has until July 5 to make a final decision on terminating Doolin's insurance.

Doolin, founded in 1896, could not continue operating without deposit insurance. But the order would not take effect for 60 days and could be postponed by a court.

Dave Meadows, an associate director in the FDIC's supervision division, said Thursday that Doolin's case is unfounded. He explained that a risk-based premium system has to be partially subjective.

The FDIC has never stripped a bank of its insurance over a premium payment. In fact, insurance terminations are rare; just two banks lost their insurance last year.

In January 1993, the FDIC began linking insurance rates to the risk a bank poses to the Bank Insurance Fund. The riskier a bank is, the more it pays the FDIC. These risk-based premiums start at 23 cents per $100 of deposits and climb to 31 cents.

Risk Categories

Using a nine-box matrix, the FDIC slots banks into a category ranging from 1-A for the best banks to 3-C for the worst.

FDIC put Doolin in the 1-B box, assigning the second-lowest rate, or 26 cents. Believing it deserved the best rate, the $55 million-asset federal savings bank paid the FDIC at the 23-cent rate.

After 18 months of wrangling, the FDIC wants the 3-cent difference paid, or about $16,000. Mr. Meadows said: "They do know why they are 1-B."

Doolin's president Donald R. Stout said in an interview Thursday that the bank will appeal the FDIC's deicision.

"All we want is our day in court," Mr. Stout said.

Mr. Deal, Doolin's special counsel, said the bank will appeal the decision to the U.S. Court of Appeals in the District of Columbia or in Richmond, Va.

Question of Accountability

"The issue here is not Doolin's condition. It's not the $16,000," Mr. Deal said. "The issue is whether the FDIC is going to be able to maintain this system of putting banks into whatever category it wants without being accountable."

Varying banks' premiums is fine as long as risk is objectively measured, said Mr. Deal, a former FDIC lawyer. But the FDIC staff should not be allowed to make arbitrary judgments, he said.

Under the risk-based system, a bank's capital is toted up and it is slotted into one of three capital categories. Next, one of three supervisory ratings is assigned, based mainly on the bank's last exam.

About 700 banks have appealed their risk-based rate, according to the FDIC. Around half of them prevailed. This is the first premium case to to take this route.

Different Perspectives

Tom Schulz, who heads the FDIC's special litigation section, said the bank is handling its problems the wrong way. The bank should have appealed the premium directly to the courts before going to the mat on insurance termination.

But Steve Woodrough, a lawyer with Langford, Hill, Trybus & Whalen in Tampa who who was an FDIC attorney for 24 years, said the FDIC is taking advantage of a small institution.

"The FDIC figured the management would cave in and pay, but the management is sticking fast," he said. "They're trying to teach them a lesson, and I think that's an abuse of power."

Mr. Woodrough said the authority to terminate insurance is designed to protect the insurance fund, and Doolin is no threat to the fund.

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