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Complaints from Taylor, Bean & Whitaker Mortgage Corpcustomers ran the gamut following the collapse of the giant wholesale lenderBut could most of it have been avoided with better oversight and planning? By Fred HiersStaff writer Complaints from Taylor, Bean & Whitaker Mortgage Corpcustomers ran the gamut following the collapse of the giant wholesale lenderBut could most of it have been avoided with better oversight and planning?Even something as simple as where customers should send their mortgage checks was anything but straightforward.Executives of the defunct mortgage lender wanted the checks sent to their Ocala company headquartersBank of America, which is taking custody of most of the mortgages, wanted the checks sent to its officesThe Florida Office of Financial Regulation said to mail the mortgage payments to Taylor Bean.Some customers said they sent their mortgage checks by certified mail only to get the envelope returned - unopened.Customers complained about spending hours on the telephone dialing their way through a maze of Taylor Bean telephone answering trees, getting only a recorded message.In comparison, when a failed bank is taken over by another financial institution, the FDIC-directed transition almost always goes off without a hitchTellers are still at their posts, and old checks still clear.That was the case when troubled Ocala National Bank was absorbed by CenterState Bank in JanuaryThe transfer was overseen by the Federal Deposit Insurance Corp., which guarantees customers' deposits up to $250,000.Barry Zigas, director of housing for the Washington-based Consumer Federation of America, said mortgage customers shouldn't always expect a smooth handoff when it comes to mortgage lenders closing their doors."In a word, banks are regulated," he saidAnd agencies like the FDIC are experienced in orchestrating such transitions."With mortgage lenders, nobody really oversees them except the state," Zigas said"But it's not the same thing."What keeps the takeover of a troubled bank smooth is the FDICIt typically arranges for a healthy bank to take over a failing one before the latter goes under."And there's a well-established protocol ..with a staff of professionals that have experience doing this," Zigas said"Sometimes there's a glitch, but by and large they [transitions] are done very seamless."Mortgage companies are a different story."There are no depositsBasically, it's mortgage companies selling [mortgage] servicing rightsIn effect, they act as middlemen," Zigas said"They don't have national charters."The federal government has an incentive to watch for failing banks because the FDIC insures deposits.Mortgage customers seldom have any direct contact with their mortgage holders other than to send them their mortgage checks or if they refinance, Zigas said.Government should provide more and better oversight with mortgages - especially with brokers, who have the most contact with people buying a home, he said."They've shown reckless disregard" with consumers' interest not put above their own desire to make hefty profits, Zigas said.He supports a White House proposal to establish a Consumer Financial Protection Agency.Such an agency would guard Americans from abusive lending practices, many of which contributed to the current financial crisis.Zigas said the proposal wouldn't solve all mortgage lender problems, but would be a step in the right direction.The proposal would give regulators broad powers over mortgage lenders and brokers and their financial compensation.While Washington lawmakers consider such reforms, the FDIC keeps getting more experience.So far this year, more than 70 banks have failed - more than 20 times the number that went under just two years agoAmong the latest to fall was Alabama-based Colonial Bank, which was taken over on FridayIt was once Taylor Bean's primary lender.Carl Walls, president of Florida Citizens Bank in Ocala and Gainesville, said by the time customers are told of their bank changing hands, federal agencies have been working on the switch for weeks."By the time the FDIC takes it over, they already have a buyer in the plan ...and they've had a plan in place for six to eight weeks," Walls said.And 90 percent of the bank remains just as it was.In addition, Florida banks use only a handful of different computer programs to oversee their financial holdings, so state and federal agencies are likely already familiar with those computer systems and can step in and take them over.That's not the case with mortgage lenders' systems."With Taylor Bean, there may not be anything standard about it [the company's computer systems]They may have a system that's unique to them," Walls said.Taylor Bean's demise became official when the Federal Housing Administration on Aug4 stopped the mortgage company from underwriting any more of its government-insured loansIt said Taylor Bean made false statements on its reports to the federal government and might be engaging in fraud.The company was the FHA's third-largest underwriter until thenAt the same time, Ginnie Mae also barred the company from selling its government-backed securities and announced it was shifting its mortgages, previously serviced by Taylor Bean, to Bank of America.On Aug3, federal agents had raided the mortgage lender but wouldn't say what financial documents they were removing form the facility.All told, Taylor Bean lost the job of servicing about $75 billion in government-insured loans that week - the vast bulk of its business.Taylor Bean had dozens of offices and tens of thousands of customers in states stretching between Florida and CaliforniaEach state regulates those branches to varying degrees."There's nothing standard about it [the regulatory structure]," said Walls"It's a jokeIt really is."Andy Grosmaire is bureau chief of the Florida Office of Financial Regulation, which licenses mortgage lenders in the Sunshine StateHe said his agency is working to help Taylor Bean customers and is starting to investigate accusations of escrow money held by the mortgage lender not being spent the way it should.The Florida office, like many of its counterparts, last week ordered Taylor Bean to stop issuing new loans.Meanwhile, Ginnie Mae is working with Bank of America to keep some of Taylor Bean's former employees at their jobs and help with the transitionUnder the plan, Ginnie Mae would pay Bank of America for the cost of that transition team.Mortgage customers shouldn't expect much relief anytime soon if more mortgage companies go under.Most industry insiders say that at least for now, states will continue to provide the bulk of mortgage oversight - even though most of them aren't prepared or organized enough to work with other states in overseeing large mortgage companies."It's a patchwork of regulationsThey're licensed separately by each stateThere is no national licensing, and sometimes those regulations [between states] are contradictory," said Christine Clifford, vice president of Access Mortgage, a mortgage research firm and consultant in Maryland."States generally don't have the money to fund staff hire the high [caliber] of staff with the expertise" to watch over mortgage lenders, Clifford said"So [state reviews] tend to miss thingsThat's what happened here." 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