Why the death of a lender matters

August 6, 2009

Earlier this evening, Reuters’ Jon Stempel reported that Taylor, Bean & Whitaker has ceased lending.  That makes TBW #351 on the Mortgage Lender Implode-o-Meter.  Questions swirl about what happened.  One possibility seems to be that the company just couldn’t manage its own growth.  As other lenders disappeared and TBW’s FHA business exploded, it’s possible they just didn’t have sufficient internal controls to insure loans met FHA underwriting standards.  When the company failed to file its annual financials with the government, things started to unravel.

It’s not clear how problems at Colonial Bank may have impacted the situation.  TBW was basically dependent on Colonial for all its funding.  The company tried to buy Colonial, injecting $300m of capital in order to make the latter eligible for $550m of TARP funds.  That would have kept the gravy train going.  But the deal fell apart late last week when Colonial reported dismal results while issuing a going concern warning.

Why should you care?  Because TBW is pretty big.  It was the third largest originator of FHA mortgages in the market.  Recently the company was doing $100m-$150m of loans a day, according to a source.  It takes time for loan applications to be approved and funded.  45-60 days I’m told.

If TBW was doing, say, 500 home loans a day, as many as 30,000 transactions may be imperiled by the company’s failure.  A lot of paperwork will have to be re-filed, new appraisals will have to be ordered, etc.  The housing market won’t fall apart by any means, but this will certainly cause a fair amount of indigestion.  And a lot of mortgage brokers that were dependent on TBW to purchase the loans they originated are now in deep trouble.

BofA could be a big winner here.  Apparently they’re going to end up taking on TBW’s serving duties.


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TBW gave me clearance to close yesterday and I was supposed to sign title docs tomorrow (08/06/09). Now, it’s all gone. Financial sanctions start against me on Monday under the sales contract. YIKES! This very well could cause me to lose the dream home I fought so hard for.

Posted by Douglas D. Durward | Report as abusive

Guess: Will Colonial Bank be taken over August 7th or August 14th.

There are folks out there who know. Please answer.

Posted by Wilbur Abrams | Report as abusive

we closed on our loan July 24th…was supposed to happen the 23rd but TBW screwed up our closing packet. We barely made it and got the loan closed and deed recorded on that Friday at 410pm…20 minutes before the court house closed for the weekend…(builder wouldnt release the keys until the deed was recorded) We had the moving truck sitting at the new house half the day, so Im out about $475 because we were going to bill TBW for their screwup….doubt I’ll see any of that.

Posted by Steve | Report as abusive

I think that, when all is said and done, we’ll find that mortgage fraud between TBW and Colonial was the driving factor in the rapid closure of TBW. While I feel for those who are caught in the closure crisis, I don’t think the hundreds of millions of the rest of us should be paying these two companies for their illicit activities.

Posted by Lilguy | Report as abusive

We purchased our permanent home in North Las Vegas last year. I am currently a Taylor, Bean & Whitaker customer in good standing. They re-financed my loan in a lower rate and we made an appointment to have their local notary come over our house to notarize our closings on August 12, 2009. How does this news affect us?

Posted by Turk | Report as abusive

Doubt Colonial will be closed either 8/7 or 8/14. CNB is still above the minimum capital reqs, so even if they fall below the minimums after 3rd Q results, the process will still probably take two months plus.

CNB would be a late 2009 failure if its not 2010 unless they run into a big liquidity problem.

GFG probably the largest in 2009 unless it continues its magical shrinking act and slips below BKUNA.

Posted by Andrew | Report as abusive

Submitted our re-fi on March 31, 2009. On July 31 finally our broker received verbal approval,(820 credit, 60% LTV, ample income). Yesterday discovered we are dead in the water. I’m out $400 for appraisal dated April 5, 2009. I guess I can consider myself lucky.

Posted by Mary | Report as abusive

Well before 1:06 pm yesterday I was a Taylor Bean employee and now me and at least 1500 other TBW people are out of work..Some of us were there over 13 years. I can tell you that they can say what they want to but Lee(the owner} cared about his company and employees. He was the most caring boss and did so much for his TBW family. This is more devastating than being out 425.00 for a u-haul. Some people are going to be loosing alot more than that!

Posted by newly unemployed | Report as abusive

We have had as many as 4 mortgage loans with TBW over the past 3 years. 2 of these were sold within the last year, thankfully. From day one, the customer service side of TBW was just a joke, and not a funny joke at that! We will just wait to hear from whatever bank/mortgage company takes over these remaining 2 mortgages as we would never be foolish enough to make payments to TBW after the news of this week. They “lost” a check for over $4000 of our money, demanded a replacement payment then cashed the original check! It took literally hours of holding and more holding to get the issue resolved and we never could get the late fees off our account. In the process of trying to do business with them we have had TBW employees admit that no one at the company knows what is going on . . . this was months ago! What a mess! The demise couldn’t have been more suitable though we do feel sorry for so many loosing their jobs. Believe me, in the long run, they are better off!

Posted by Deborah Matthews | Report as abusive

I begged TB&W to sell my mortgage because their escrow division is /was so horrible. I was without insurance on a rental property for EIGHT months and they told no one. The money was in the account they just didn’t pay the bill on time so the ins. co cancelled the policy. The risk to me was incredible! Any company that is run like that shouldn’t to be in business. Good riddence to them!!

Posted by Ron Otis | Report as abusive