ATLANTA -- The Federal Deposit Insurance Corp. has refused to back funds placed with a savings bank proposed by the Housing Finance Authority of Dade County, Fla.

Citing "unproven, untested funding mechanisms" and an "asset4iability mismatch" at the proposed thrift, the FDIC wrote the Miami-area authority on Aug. 24 that it had denied federal deposit insurance for the bank. The FDIC said the housing agency has the right to appeal within 15 days.

The authority's chairman, Milton Wallace, said last Friday that an appeal will be sent to the FDIC today.

"I really think the FDIC has misunderstood what we are trying to do," said Wallace. "Our task right now will be to give them more information and assuage their concerns by reducing exposure of the bank's funds."

FDIC officials were not available for comment Friday.

Wallace said that whatever the outcome. the housing authority will remain committed to augmenting its use of tax-exempt revenue bonds as a funding source for mortgages to low and moderate-income families.

If the authority wins approval for the bank, he said, it would be the first housing agency in the nation to do so.

The FDIC's action follows approval last December by Florida Comptroller Gerald Lewis of a state charter for the envisioned Dade County Housing Finance Authority Savings Bank.

With $11 million in capital from the authority, the bank would offer savings accounts and certificates of deposit that would be used to fund lowinterest home mortgages to qualified borrowers.

The authority hopes that the thrift's deposits could be garnered at belowmarket rates from financial institutions seeking to comply with the federal Community Reinvestment Act, which requires banks to invest funds in areas where they make loans.

In addition, Florida empowered the savings bank to issue mortgagebacked securities, which would allow it to use its deposit base to continuously issue loans.

In approving the state charter, however, Florida officials said the bank could not open its doors until it received FDIC approval of deposit insurance.

Wallace said that in an effort to reassure the FDIC, the savings bank would agree to limit its deposits to $40 million and its mortgage loans outstanding to $20 million.

"With these safeguards in place, and with our extremely favorable capitalto-assets ratio, I cannot imagine how our bank could jeopardize the FD1C's insurance fund," Wallace said.

In its letter to the authority, which was signed by acting deputy executive secretary Patti C. Fox, the FDIC cited a number of concerns.

"While the board of directors is not unsympathetic to the goal of promo6ng low~income housing," Fox wrote, "the applicant's business plan does not demonstrate that [its] unorthodox business strategy, with its high interest-rate risk, lack of diversification, asset-liability mismatch, and unproven, untested funding mechanisms, will permit the applicant to sustain earnings during the crucial first three years of the applicant's operations."

Patricia Braynon, executive director of the housing authority, said that the authority's appeal will include a point-by-point response to the FDIC's letter.

She said that the authority hopes its cap on the dollar amount of loans and mortgages will assuage concerns about a possible asset-liability mismatch. She said the authority will also present evidence that many banks plan to deposit funds with the proposed thrift, and that there is a market for the bank's mortgage securities.

About 30 letters of support have come in from banks since the FDIC rejection of deposit insurance. according to Antonio Junior, the housing authority's special projects coordinator. Most of the letters, Junior said, include commitments to place up to $100,000 of deposits with the proposed savings bank. FDIC insures deposits as large as $100,000.

One investment banker who supports the authority's contention that there will be a market for its mortgage securities is Leopoldo Guzman, president of Miami-based firm Guzman & Co.

"We are convinced that adequate outlets exist today for the sale," of these bonds "without causing the recognition of substantial discounts," Guzman wrote the authority last week. The banker cited local financial institutions, federal housing agencies, and public pension funds as potential investors in these securities.

The FDIC rejection followed a prolonged effort by authority officials to gain the necessary approvals in Florida, a process begun six years ago.

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