Bank Failures Prompt Near Record Amount of Mortgage-Related Closings

Dallas, TX (AHN) – Driven by 100 bank failures so far this year, mortgage-related failures and closings have already exceeded the total for last year’s and are within two failures of a record, according to the Mortgage Graveyard — a journal of failed lenders maintained by MortgageDaily.com.

Through Oct. 2, 164 mortgage-related firms have either collapsed or been shut down, the journal found. During 2008, 124 mortgage-related firms either failed or were closed down.

The increased activity is directly correlated to the rapid succession of bank failures, the report said. As of Friday, 98 federally insured institutions have failed this year- marking a 300 percent increase from 2008.

The number of mortgage-related closings in 2007 was a revised 165, the highest level since MortgageDaily.com began tracking in 1998. But 2007’s activity included only three banks.

Among this year’s biggest failures have been BankUnited, FSB, which failed in May; Guaranty Bank, which was seized in August; and Taylor, Bean and Whitaker Mortgage Corp., which collapsed after it was suspended by FHA, Freddie Mac and Ginnie Mae in August.

This year’s mortgage-related closings will rise to more than 200 firms by the end of the year, predicted by MortgageDaily.com founder and publisher Sam Garcia. He attributed this calculation to the rising number of regulatory orders being issued against financial institutions.

Last month, the web site tracked more than 100 regulatory actions against U.S. financial institutions, including 56 cease-and-desist orders and 27 removal-and-prohibition orders.

Because of the rapid pace of bank failures, the Federal Deposit Insurance Corporation, which insures bank deposits, is proposing to collect three years of risk-based assessments in advance this year so that its Deposit Insurance Fund has enough capital to handle upcoming failures.