Taylor, Bean and Whitaker No Longer Able to Issue FHA Loans

Taylor Bean was known for being less strict than other mortgage lenders. The agency insured mortgages with down payments as low as 3.5 percent, and didn’t have minimum credit-score requirements. “I’ve heard it said it’s good that we have Taylor Bean there because no one else will buy these loans,” said David Lykken, a mortgage expert based out of Austin, Texas. “To say they’re a bottom-feeder may be too strong a statement, but that’s how they’re viewed in a lot of cases.”
On Wednesday, Taylor Bean shut its doors. A press release from TBW reads:

“TAYLOR, BEAN & WHITAKER MORTGAGE CORP. (“TBW”) RECEIVED NOTIFICATION ON AUGUST 4, 2009 FROM THE U.S DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, FREDDIE MAC AND GINNIE MAE (THE “AGENCIES”) THAT IT WAS BEING TERMINATED AND/OR SUSPENDED AS AN APPROVED SELLER AND/OR SERVICER FOR EACH OF THOSE RESPECTIVE FEDERAL AGENCIES.”

Since then, 2,050 employees have been laid off, and federal authorities have gone in and searched the company, forced it to stop making FHA loans and confirmed that its leaders were under investigation for fraud.

So now what?

• Thousands of borrowers seeking mortgage loans and refinancings in Taylor Bean’s pipeline are suddenly back to square one.

• Cash-strapped borrowers could struggle the most to find a replacement lender offering affordable terms. Taylor Bean was one of the country’s largest FHA (Federal Housing Administration) lenders, trailing only Bank of America and Wells Fargo. It was one of very few handling FHA loans for manufactured homes.

• Hundreds of small banks and brokers that sold their loans to Taylor Bean are suddenly scrambling to find new partners. The removal of a major player could lead to higher prices as well as fewer choices.

• Colonial Bank, a $26 billion Alabama bank with nearly 200 branches in Florida, was relying on Taylor Bean as a lifeline. A planned $300 million infusion of capital from Taylor Bean fizzled last week, raising doubts Colonial will continue.

A word on FHA loans. The Federal Housing Administration does not MAKE the loans, but rather, insures them from private lenders. FHA loans are largely issued to financially-strapped or first-time homebuyers due to their low down payments and initial interest rates. TBW subsisted on insuring such loans; to be suspended from doing FHA loans essentially shut down the business.

Anderson Chase Financial