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Taylor Bean Told to Cease and Desist, Suspend Foreclosure Activity on All Remaining Loans

August 26, 2009

(via Ocala Star-Banner; HT Robb Strupp)

Florida-based Taylor, Bean and Whittaker, formerly the nation’s 12th-largest loan originator and servicer, has filed for bankruptcy reorganization amid new sanctions by the Florida Office of Financial Regulation, the Ocala [Florida] Star-Banner reports:

In a news released issued Monday, TBW said it believes the investigations surrounding the closing of Colonial Bank brought federal regulators to its doorstep, which left the company unable to continue operations. As a result, the company abruptly closed its doors, laying off about 2,000 employees.

In a separate story, the Banner says the state’s financial regulator has issued a cease and desist order to the company, forbidding it from servicing any of its remaining 30,000 or so loans and freezing all foreclosure cases, in part because the company had only one bank account, meaning it commingled funds:

Florida Office of Financial Regulation Bureau Chief Andrew Grosmaire said mingling the funds was against the law and “extremely serious,” despite Taylor Bean’s claim it was keeping track of the money. “It’s extremely serious because you don’t want the mixing of funds together. Operating funds is (Taylor Bean’s) money, and escrow money is not their money,” he said.

Worse than that, Taylor could not show a daily (or even a weekly) balance sheet, the Star-Banner says:

Grosmaire said that after several requests for information from Taylor Bean for its weekly financial balance sheets—showing employee payroll, outstanding checks and cash on hand—Taylor Bean officials told him they kept no such financial accounting.

Here in Maryland (and despite some strange loans TBW funded), Mark Kaufman of the state Department of Labor, Licensing and Regulation (DLLR) says the “cease and desist” orders are less important that the overall situation, which is a “winding down” of TBW. DLLR has been trying to help the 9,500 or so state residents whose mortgages TBW serviced locate their new services.

The key to that, he says, is knowing which big, non-TBW entity underwrote the mortgage. The two big ones are Ginnie Mae and Freddie Mac, he says, and both have helpful information on their web sites (here’s a pdf of Ginnie’s and here is Freddie’s). These are helpful only if you already know you have a Ginnie Mae or Freddie Mac loan, however.

“The system is great for getting people from first base to home plate,” Kaufman says. “The problem is, a lot of people don’t know how to get to first base.”

Freddie’s home page has a lookup for that too, but not everyone can be expected to know how to do this without help.

“I spent half an hour on the phone this morning with a woman who dutifully sent her check to Bank of America [which took over TBW's Ginnie-backed paper]” Kaufman says. “Only problem was, she had a Freddie Mac loan, so she should have sent to Cenlar.”

This sort of thing can be very stressful to borrowers, of course. The important thing to remember, Kaufman says, is that even if you send your check off to the wrong servicer, you will not be hit with late fees, adverse credit reports, etc. Though no one has officially come out and said it, there is a grace period here—similar to the one you got after you first closed your loan. Freddie spells it out:

Your new Freddie Mac servicer will properly account for all payments made to TBW. You should not be assessed a late fee and your credit report should not be impacted during the transition period. In the unlikely event your payment is not properly applied to your mortgage balance, or if you discover an error with your payment history, contact your new servicer to correct it.

This is good news indeed for TBW’s many honest borrowers.

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