Monday, January 11, 2010
Minnwest Bank Metro - Breaking the Bank
Guest post by the Hawthorne Hawkman. Image from www.classicglassandmirror.net.
A Star Tribune article appeared today regarding commercial real estate loans in relation to total equity--hey, wait! Wake up! This will be interesting, I promise. It relates to Pamiko.
In the midst of this article that was fascinating to me and boring to the 99% of the planet that is unable to say, "Mortgages are my caffeine" with a straight face, the name Minnwest Bank Metro came up. Minnwest is one of two creditors appearing on the multimillion-dollar Pamiko foreclosures. Aspen Financial LLC is the other.
So I started doing a little digging about Minnwest and here's what I found...
ADDENDUM: I requested a "non-Star Tribune link" a story since Strib links sometimes go dead. A JNS reader posting under the name "Another Mortgage Geek" provided that link and one other that are now in the comment section. I have posted hyperlinks in the paragraph about the Ramsey Town Center.
First up under their "About us" section of their website, they REALLY stress community involvement. The opening paragraph reads: "Since its beginning, Minnwest Bank has been dedicated to community involvement. You'll find our bankers and representatives involved in local foundations, county economic development corporations, charities, food shelves and local social organizations. You'll see them in the town parade or organizing a charity bike ride. You'll even discover them teaching kids about money and finances."
Then the final paragraph of that page ends with: "Minnwest Bank's long-term objective is to serve the Twin Cities metro area and regional centers in and around Minnesota. We plan to establish additional banks in markets we think we can bring our expertise, experience and capabilities to our market niche. . . and continue with our community involvement."
Well, come April of 2010, when the redemption periods expire on Pamiko's foreclosures, Minnwest Bank is going to be the owner of a slew of vacant and dilapidated housing. We'll see what kind of community involvement they participate in then. It better be more than the occasional shoveling of a sidewalk.
There's also a newsletter with an article about how to tap into your home's equity safely and responsibly. Surprisingly, the piece is devoid of helpful tips such as "don't take out loans totaling $6.2 million dollars on a handful of properties, some of which were already involved in fraud, and that need the kind of repairs you almost certainly will never make." That would have been helpful for some people to know.
Next is an article from September of 2008 in the Minneapolis St. Paul Business Journal called "Breaking the Bank (and Fixing it Again)." The byline underneath reads, "And breaking it again. And again. And then fix--whoops! Nope, still broken." Tom Longlet, listed at the time as the President of Minnwest Bank Metro, answers a few basic questions about the financial crisis at the time. He states: "We tend to do business with people who are turned away from or turned down by the bigger banks, and at our institution we’ve tried to take advantage of that." So probably someone was smart enough to turn down Pamiko for these ridiculous lines of credit that are now causing a wave of foreclosures in our neighborhood. Again.
More recently, a November 2009 article lists the metro area banks with third quarter losses over $1 million. Coming in fourth place is Minnwest Bank Metro, with a 3Q loss of $3.9 million. Click here for a handy chart about that. As any thoroughbred horse racer with a blog can tell you, fourth place isn't bad but it's still disappointing. Once everything with the Pamiko houses shakes out, I'm betting we'll see a higher finish out of Minnwest.
Minnwest Bank is also connected to the failed real estate development at the Ramsey Town Center. Minnwest actually sued the other folks who were involved in fraud that caused this project's collapse, but is this coincidence or a pattern of some sort? Given their alleged ties to Tom Petters, I have my doubts.
And finally we're back to the minute factoid that started this jaunt: Commercial Real Estate loans in comparison to total equity. From what I could tell when reviewing the documents on the $2.5 million, $1.9 million, and $1.3 million sheriff sale bids, these Minnwest Bank Metro loans were commercial real estate products. And regulators consider it a "red flag" when the ratio of money in commercial real estate loans exceeds a bank's equity by 300%. Minnwest's total...403%.
I believe that even if these million-dollar foreclosures were legitimately done with no fraud on either Pamiko's or Minnwest's part, that the crossover of having one home appear on numerous lines of credit indicates a tremendous lack of oversight by Minnwest. And if such acts were fraudulent, then I don't see how Pamiko could have pulled that off without the help of someone at the bank. For the sake of all the good people who work there, and for the good customers they serve, I hope I'm wrong and that the fallout from Pamiko-gate will not harm consumers and honest folk at that company.
Still, I do believe that the indications of malfeasance are sufficient enough that the State Commerce Department ought to do a thorough review of Minnwest Bank - especially its commercial real estate loans.