Taylor Bean, FDIC settle Colonial Bank account and loan disputes

By Caroline Salls

Pittsburgh, Aug. 11 - Taylor, Bean & Whitaker Mortgage Corp. requested court approval of a settlement with its official committee of unsecured creditors and Colonial Bank receiver the Federal Deposit Insurance Corp., according to a Wednesday filing with the U.S. Bankruptcy Court for the Middle District of Florida.

Before filing for bankruptcy, Taylor Bean said it had an "extensive banking relationship" with Colonial. Specifically, the company maintained several operating accounts at the bank, as well as several custodial accounts needed for its mortgage servicing operation.

Colonial Bank also provided financing to the company under a complex mortgage warehouse facility.

After Taylor Bean was notified in August 2009 that its authority to originate, sell or service mortgages was suspended, Colonial Bank placed an administrative hold on all of the company's accounts.

The bank was subsequently closed, and the FDIC was appointed as its receiver.

As a result of all of this, Taylor Bean said its business collapsed, and it was forced to file for bankruptcy.

During the asset and servicing reconciliation process, the company said several disputes arose with the bank.

Under the settlement:

• Ownership of COLB loans will be resolved by recognizing the FDIC's ownership of Colonial Bank's 99% participation interests in those loans and the method of payment to the debtor's estate for its 1% interest;

• The issue of ownership and manner of liquidation of AOT loans will be resolved by transferring them to the company, subject to a first-priority security interest in favor of the FDIC;

• The issue of entitlement to specified loans will be resolved in favor of Taylor Bean, resulting in $78 million in proceeds available for the company;

• The issue of ownership of Selene loans will be resolved in favor of the company;

• All custodial accounts related to the company's servicing and corporate accounts will be distributed in accordance with a July 1 final reconciliation report;

• The FDIC will release its hold on $13.8 million in TBW II funds, making them likely available to the company's estate;

• The FDIC may eventually turn over BB&T funds to Taylor Bean's estate to be used to resolve investor and borrower issues;

• The FDIC will be granted a $1.75 million substantial contribution claim;

• The FDIC will make up to $15 million available to trade creditors for its unsecured claim recovery; and

• The FDIC will vote in favor of a joint plan of liquidation to be proposed by Taylor Bean and the committee.

Taylor Bean, an Ocala, Fla.-based mortgage banker, filed for bankruptcy on Aug. 24, 2009. Its Chapter 11 case number is 09-07047.

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