Act 1: Mortgage giant Taylor, Bean & Whitaker is forced to stop making government-backed loans and closely connected Colonial Bank becomes the sixth-largest bank failure in U.S. history, leaving hundreds of thousands of borrowers nationwide in the lurch.
Act 2: A hodge-podge of federal and state regulators sweep into Taylor Bean's Ocala headquarters and try to clean up the mess.
Six weeks in, however, that rescue effort has turned into triage, exposing widespread regulatory confusion and a legal labyrinth that was ill-prepared to deal with the kind of problems that Taylor Bean served up:
- Many borrowers across the country found their property taxes and/or insurance payments weren't paid out of escrow. The FDIC, as Colonial Bank's receiver, and Taylor Bean's attorneys are working on a bankruptcy court plan to resolve control of the escrow accounts and customer records, but it could take weeks for relief to trickle down to borrowers.
- Borrowers who had recently refinanced a Taylor Bean mortgage and received the overage from their escrow accounts found those checks subsequently bounced. A dozen complaints have been filed in Florida alone.
- Cenlar, a company picked to take over servicing of Taylor Bean's current Freddie Mac loans, had customer service problems of its own. Borrowers complained they received only a busy signal at Cenlar's toll-free number. Last week, Cenlar's contact information link on its Web site was displaying this message: "This page is currently not available."
- With at least a half-dozen federal agencies along with state regulators across the country involved - plus at least a half-dozen financial institutions and now a bankruptcy judge - consumers have been frustrated in finding answers. Compounding the confusion: Regulators have dished out conflicting advice about where to send payments and how to handle complaints.
Consider the circuitous route taken by Taylor Bean customer Joe Sergio of Rochester, N.Y., in trying to get answers in July as the company was starting to unravel.
Unable to talk to anyone at Taylor Bean, Sergio tried the New York Attorney General's Office, which sent him to the Florida Bar Association, which sent him to the Florida Office of Financial Regulation, which sent him to the New York State Banking Department, which sent him to an agency called the Rochester Empire Justice League, which didn't return his calls. Recently he called the Attorney General's Office again, which suggested he try the bankruptcy court.
Sergio had several mortgage issues to discuss but said he couldn't get past his first question: "Who's in charge?"
Brenda Grauer, assistant Illinois attorney general and that state's point person to help Taylor Bean customers, acknowledged widespread frustration with so many agencies involved.
"It was so sudden, and there wasn't any planning for this at all," she said, adding that it seemed "the right hand didn't know what the left hand didn't know what the right foot didn't know what the left foot was doing."
Brian Sullivan of the U.S. Department of Housing and Urban Development said the transfer of loan servicing happens every day. Customers receive a standard "goodbye, hello" letter indicating their new mortgage company and move on.
But the Taylor Bean case was an unusual one coming during what's "generally an extraordinary time" anyway, he said.
"I personally have not encountered a situation like this in my 91/2 years here," Sullivan said, adding the situation is particularly stressful for homeowners dealing with bounced checks. "It does put the borrower into a situation of being their own advocate, and it just has to be mighty frustrating."
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Jeff Kaden, director of Engineering Services at Indiana University in Bloomington, just wanted to deposit a check for $1,883.
He had refinanced his home mortgage, and the check represented the balance in closing out his old escrow account. Unfortunately, that old escrow account happened to be with Taylor, Bean & Whitaker - and the check promptly bounced. His bank, Chase Bank, charged him a $10 fee.
"Has there been any investigation or update on when, if ever, this money will be returned to former TBW customers?" an irate Kaden wrote in an e-mail. "After all, this money is not a TBW asset."
Kaden's query underscores one of the fundamental problems in the wake of Taylor Bean's meltdown: confusion over who was calling the shots.
When a bank fails, the FDIC takes over - typically after hours on a Friday. It seizes that bank's assets, often transferring them immediately to another bank. The money in accounts is federally insured up to $250,000, so customers are confident of getting their money back even if it takes a while in worst-case scenarios like the IndyMac implosion.
It's not a seamless process, but it's far smoother than the turmoil caused when Taylor Bean seized up.
From the start, state and federal regulatory bodies gave customers conflicting and changing advice.
Florida regulators initially told customers to keep sending their mortgage payments directly to Taylor Bean. No, said both federal housing loan guarantor Ginnie Mae and HUD. Those payments should be sent to Bank of America. Bank of America, meanwhile, told customers to do nothing until they received a letter in the mail confirming that their mortgage account had been transferred.
It turned out that the initial advice to send checks to Bank of America was overreaching; Bank of America was taking only Taylor Bean's Ginnie Mae loans.
Eventually a posting on Taylor Bean's home page tried to clarify the situation: Freddie Mac loans, if current, were being serviced by Cenlar. If not current, the Freddie Mac loans would be serviced by either Saxon or Ocwen. Meanwhile, under a proposal in bankruptcy court, all mortgage loans owned by Colonial Bank would be shipped to RoundPoint Mortgage Servicing.
That didn't clear things up for Naomi Figel of Plant City, who received notice in the mail a couple of weeks ago that her mortgage loan had been transferred to Central Loan Administration & Reporting, a.k.a. Cenlar.
She had a troubling conversation with a Cenlar representative who Figel said had "a bad attitude" and gave her wrong information about the status of her escrow account. Following up last week, Figel was unable to reach anyone else from the company by phone, and a contact list on Cenlar's Web site was down.
Sergio, the Taylor Bean customer from Rochester, N.Y., finally got through to Cenlar but didn't like what he heard.
Taylor Bean had debited Sergio's account twice in the latter half of August for a mortgage payment, but a Cenlar rep told him the company had no record of the transactions, and his next payment is due in October.
Sergio said he's worried his escrow account won't have enough money in reserve when taxes come due. "Cenlar seems to not be interested in helping me and has no information other than they're trying to find information out," he said.
Robin Ziegler of the Illinois Attorney General's Office called the lack of information to help people "disconcerting." Until it gets more information, her agency is telling mortgage customers to "reach out to Taylor Bean and try to figure out who their new servicer is."
Holly Hinson of the Florida Office of Financial Regulation said if consumers have a problem with a particular mortgage servicer, such as Cenlar, they should turn to the agency that regulates them.
Unfortunately, she added, that's not a simple process, either. The state Office of Financial Regulation oversees RoundPoint and Ocwen; the Office of the Comptroller of the Currency oversees Bank of America and Saxon; and Cenlar is regulated by the Office of Thrift Supervision.
Hinson said some customers contacting her office held property in another state and were directed to find the appropriate regulator in that state.
"Unfortunately, every state does it a little bit different," she said. "Sometimes it's under the secretary of state's office; sometimes under the attorney general's office.
"I know this isn't a one-step process for the consumer. ... It's very frustrating for all those people out there."
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For now, state regulators say, they can only give limited advice to callers until the bankruptcy court settles the dispute between the FDIC and Taylor Bean.
The FDIC, as receiver for Colonial, has accused Taylor Bean of holding hundreds of thousands of homeowners "hostage" by refusing to turn over their loan information to new servicing companies. Taylor Bean attorneys have contended the problem was a freeze imposed by Colonial Bank on more than 100 accounts holding about $1.9 billion.
A bankruptcy judge in Jacksonville as soon as Monday may approve an order to start reconciling Taylor Bean's books, sorting through uncashed checks and unfreezing accounts. But no one was promising a quick fix.
Jeff Harrington can be reached at email@example.com or (727) 893-8242.
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Still trying to get answers
Here's an example of how complicated it can be for Taylor, Bean & Whitaker customers trying to get answers:
Unable to talk to anyone at Taylor Bean in July, Joe Sergio of Rochester, N.Y., tried the New York Attorney General's Office, which sent him to the Florida Bar Association, which sent him to the Florida Office of Financial Regulation, which sent him to the New York State Banking Department, which sent him to an agency called the Rochester Empire Justice League, which didn't return his calls. Recently he called the Attorney General's Office again, and it suggested he try the bankruptcy court. Sergio had several mortgage issues to discuss but said he couldn't get past his first question: "Who's in charge?"
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Navigating Taylor, Bean & Whitaker maze
Where do you file a complaint as a Taylor, Bean & Whitaker customer? That depends on the nature of your complaint, who has taken over servicing of your mortgage loan and what state your property is in.
Here are some consumer guidelines:
- The U.S. Department of Housing and Urban Development suggests irate customers consider filing a complaint through the Real Estate Settlement Procedures Act (RESPA). But first, customers have to send a formal complaint to Taylor Bean or their new lender and wait 20 days for a response. For details on the process, go to: www.hud.gov/respa, which includes a sample complaint letter.
- Various lenders, overseen by various regulatory bodies, are taking over different slices of Taylor Bean's portfolio. For customer service issues with Bank of America or Saxon, the primary regulator is the Office of the Comptroller of the Currency; the Florida Office of Financial Regulation oversees RoundPoint and Ocwen; and the Office of Thrift Supervision oversees Cenlar.
Jeff Harrington, Times staff writer