Industry News

Bank fails, regulators cite mortgage-related problems

FDIC serves as receiver in NetBank shutdown
Published on Sep 28, 2007

Federal regulators have shut down NetBank, an Internet bank with no physical branches, after the bank failed to rebound from "significant losses in 2006 primarily due to early payment defaults on loans sold, weak underwriting, poor documentation, a lack of proper controls, and failed business strategies," according to a Friday announcement. The U.S. Office of Thrift Supervision reported that it had executed a formal enforcement action with NetBank in 2006 directing the bank to correct its operating problems, though that effort was unsuccessful "and it became clear that high operating expenses combined with continuing losses were jeopardizing the institution's viability," the office reported. Directors for NetBank, based in Alpharetta, Ga., reportedly attempted to sell the bank, though those efforts failed and the bank had "no remaining prospects for raising capital and achieving profitability." The board of directors of the Federal Deposit Insurance Corp. today approved the assumption ...

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