Taylor, Bean & Whitaker Mortgage Corp. announced it has filed for Chapter 11 bankruptcy protection, the move coming three weeks after a chain of events "crippled the company's business operation."
The death spiral began after the Federal Housing Administration suspended Taylor Bean's authority to issue FHA-insured loans. That was immediately followed by notices from Ginnie Mae and Freddie Mac (FRE) suspending Taylor Bean as an issuer of mortgage-backed securities and a mortgage servicer.
Taylor Bean was one of the largest independent home-loan providers before it closed down its mortgage-lending operation Wednesday in the wake of the FHA move. Among originators of FHA mortgages, Taylor Bean was the third-largest, and it was the nation's 12th-largest home-mortgage lender overall, according to Inside Mortgage Finance, a trade publication.
The company was forced to lay off some 2,000 workers and Taylor Bean said Monday it "has no way to continue normal business operations" as it appeals the actions by the FHA, Ginnie Mae and Freddie Mac. While under bankruptcy protection, it will work to recover, restructure and possibly liquidate its assets.
Taylor Bean put the blame for the events on the investigations surrounding the failure of Colonial Bank, which for years was Taylor Bean's primary bank. But it froze nearly 100 Taylor Bean bank accounts in the days after the federal suspensions on Taylor Bean. "This action created myriad problems in processing borrower payments and making payments on their behalf - such as homeowner's insurance premiums and real estate taxes," the company said Monday.
Taylor Bean added that it is in discussions with the Colonial's receiver, the Federal Deposit Insurance Corp., to end the freeze.
Colonial BancGroup Inc. was closed Aug. 14 by regulators after an agreement was reached to have BB&T Corp. (BBT) acquire most of its assets and all of its deposits. The move capped weeks of speculation about the fate of the bank, which had been struggling amid growing losses on real estate and construction loans and was facing a federal criminal probe. Colonial's failure marks the fifth largest U.S. bank failure ever.
"This is a very complicated business, and the speed of its collapse has been stunning," said Neil Luria, Taylor Bean's new chief restructuring officer. "We are very appreciative of the efforts of the members of management and other company employees, along with a large team of professionals, who have worked tirelessly under very stressful circumstances to make today's filing possible. Much remains to be done, but we are committed to creating and realizing the value of the company's assets."
