More Banks Seized
Federal regulators seized three banks last night, including Downey Savings and Loan Association, a large California mortgage lender, expanding what is by far the most expensive crop of bank failures in modern American history and indicating that the pace of failures is increasing.
The Federal Deposit Insurance Corp., which took control of the banks, said holders of about $1.9 billion in Downey mortgage loans who have fallen behind on their payments would now be eligible for reduced monthly payments to help them avoid foreclosure. The unprecedented move in connection with a bank failure expands the agency’s controversial loan-modification program, which is opposed by other parts of the Bush administration.
Downey, with $12.8 billion in assets, is the third-largest bank to fail this year, after Washington Mutual and IndyMac Bancorp. All three institutions were large mortgage lenders focused on the California market and regulated by the Office of Thrift Supervision.
