Atlanta Real Estate | Atlanta Housing News for Real Estate

I had money in savings in NetBank for about three months with a promotional offer and then got out.  Glad to be out and will keep this one in mind and avoid future deposits in net banks.

Rob

Rob thanks for commenting!  I'm now wondering if I have any funds in CD's there!

Wow, This is very interesting!  Very unfortunate if your money is in this bank...at least above 100K. 

Lola Audu  It is when you really think about it.  There is a large gap between insured and uninsured if you read the additional link I just placed on the bottom of the story.  Rob Lang also brought up an interesting item I overlooked.  Many persons and including myself often do short term CD's with my own bank, never looking at who they are held with!   That is fine as long as they are not over 100K!

Thanks for letting us know.

I was in banking in the late 80's and early 90's and with a bank in New England that was taken over by FDIC. What a joy that was to see the 11 o'clock news on a Sunday night showing the front doors having padlocked chains so that no one could enter the building!

I feel for the borrower's who had deposits over the covered $100K as well as for the employees who are now out of a job. At least in 1991, we still had a job, somewhat, and became employees under FDIC until they could sell us off! I don't believe that will be the case here.

Working in the Securities/Trust Division as a supervisor, it was definitely not a joy trying to salvage our credit rating and having to explain things to the clearing houses. So it should be interesting to see what happens come the beginning of the week.

I never thought I would see such an event again. But, as you stated, when lending practices are extremely loose with little or no supervision, this is what can happen.

I only hope this is near the end of things in the mortgage industry.

Cris Burlew Chris think about this.. in the 1980's you actually had to put down money to buy a home!  In the 1920's on a balloon note you had to have down payment of at least 50%!  What were lenders thinking lately????  The reason that the OTS was involved was the percentage of mortgages in the banks holdings were so high...over 60% of assets!  A 100% in 2003!

FDIC Statement of Closure posted in conjuntion with the www.NetBank.Com closure.

Jim - I did not read this - thanks for posting! It is a bit unnerving to think we may see more of this.

The result of all these 100% loans is the homeowner has no investment and it is often easier to let the home go and the banks are suffering. Why would any bank hold most of their investment in real estate?

Wow Jim thanks for sharing. I did not catch the news yesterday. I have heard their ads all the time and never would have thought they invested all the eggs in one basket. As for myself I was leery of the fact that you couldn't walk into a branch office even though they advertised better interest rates.

Paula Henry  Good question?  Especially if they are bad loans!  At one point the Wall Street Journal did a piece on NetBank ... in 2003 100% of their assets were mortgage loans.  The OTS was involved with the shut down because the banks current ratio of mortgage loans was over 65%.  Most in sub prime. 

Keith & Robin Perry The story broke yesterday evening.  Yes all internet, no branches, mostly mortgages, and still they employed 1200 people. I wonder if the closing will  effect us with layoffs!  Since ING purchased all the accounts, they will service.

Jim, they use the word "Bank" but it is really an S&L. Mortgage lending is the main business of S&Ls (they don't make consumer loans), so they were probably "guilty" of having too many recourse loans that they had "sold" during the hot market. It could have happened to almost any S&L. If they only made "portfolio" loans they probably wouldn't have gotten in trouble, but look at all the business they would have missed.

Bill Roberts

Bill Roberts   What raises more questions of why no one is commenting on this really.  They do not understand the implications of a Federally insured bank that had no over-site until someone noticed the bank was only writing risky loans insured by we the people the US Government?  The truth is that Federal regulators regulated nothing!  The risks did not end with the bad loans, that is just the beginning.  The fallout in real estate does not end with the foreclosure, the risky loans were bundled into security instruments or collateralized mortgage obligations.  Fraud begets more fraud and begets losses that do not end at the doorsteps of the foreclosed homes.  The mess ends up in stock brokerages that fail because they invested in the worthless paper, in banks that are not being repaid for the bad loans they lent, which places your money at risk, your neighborhood in peril, and the economy in the dumps!  There was a really well written article in the New York Times article 'Six Fingers of Blame in the Mortgage Mess"

Jim:  I had not heard this news.  Very interesting post. I guess I'm a bit old-fashioned, but I still like going into a branch and being on a first name basis with the tellers.

Hey Donna!  The scary thing is that it is a bank!  It is the 12th largest bank failure in US history, it is the largest bank failure ever in the state of Georgia, and the first major bank failure since the last savings and loan failures.  The implications are very scary.  Whether or not the Federal government blames people for not doing their job correctly...neither was the Federal Government! The Federal regulators were not doing their job.  Sort of like all the toys coming in from China with lead paint, and sort of like the border fences that were never built as mandated by US law.

Jim,

They had all their assets in real estate?  That's crazy - they diversification of investments in high school economics class.  You have to wonder what were they thinking? 

We continue to hear way too many stories like this.  We can all thank the subprime fallout for this...hopefully this con't continue on for too much longer...

Kaushik Sirkar  The more I read about sub prime the more I convinced they were all fraud.  To quote a European article I read that referenced the American Bank failure  "US bank collapse is largest in 14 years"  They are not holding any punches and they are saying more is to come!

Rita Taylor Yes, in 2003 they had a 100% of their assets in mortgages, and since hte Office of Thrift Supervision was involved in the closure the mix of mortgages as assets were over 65%.  That is suicide especially since a lot were sub prime.  I also have to think what was teh Federal goverment thinking or not doing?  Was everyone so greedy that it did not matter?  This is some way serious stuff!  An update to this story was just posted on http://www.bloomberg.com/

NetBank Files for Bankruptcy After Regulators Take Over Unit

They should have been shut down a long time ago.  I have had people call me to complain about the blatant bait and switch tactics they would use to obtain mortgage loans.  This is a major problem with internet companies.  Just google Netbank mortgage fraud to see how vast it actually is.

 

John Popp Mortgage Professional  I gree, but why was a Federaly insured bank not regulated?  It is like putting a baind aid on a dead person, it never works!

 

Jim you are right,  The Fed dropped the ball on this one.  I am sure that there are many more out there that need to be shut down.  The Fed is too busy bashing us mortgage brokers/mortgage bankers and are ignoring the other side.

John Popp Mortgage Professional  I agree.  Look at the pass everyone is giving to Citibank today.  They announced their profits are off 60% due to the sub prime mess.  The banks again got a pass!