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.

7 comments:

Pond-dragon said...

Time to change the name to Johnny on the "SPOT" NS! I love peopel that now how to connect the dots, reminds me of myself! "Love it"

Another Mortgage Geek said...

pipress link:
http://bit.ly/4FhBx6

minnwest sued in petters related matter:
http://bit.ly/6RvMaR

The Hawthorne Hawkman said...

Thanks, Another Mortgage Geek! I'll add those links momentarily.

And one comment has been rejected due to spam content.

eric zaetsch said...

Was Bruce Nedegaard involved in any of the Minnwest loan situations you know of that went splat? He was the main promoter of Ramsey Town Center. You can google the name for the story. I have blogged about it, as a resident of Ramsey, and you can google search terms specific to the blog I write, "Developers are Crabgrass":

zaetsch.blogspot.com

There have been at least two other recently splatted deals in Ramsey, you can google "Brookfield" and "Summerset Meadows" for detail [each is mentioned on the blog.

Minnwest got into a syndicated loan placed out of a North Branch bank, and probably had the lion's share, doing the foreclosure for the banking group.

My understanding, $35 million lent, most for land purchase, half the project land was parceled out but the principal was not paid down. Nov. 2006, Nedegaard died, two weeks after being hauled into an involuntary bankruptcy, etc.

PiPress, Dave Orrick, did a series of articles a few summers ago.

The Hawthorne Hawkman said...

To Mr. William Dunigan, who posted a comment that I rejected as spam:

Your comment was laced with references to Biblical passages and other proselytizing language. It contained no references to anything being discussed in blog posts or comment sections.

What ultimately led to my decision to classify this as spam and reject the comment was a link posted to where one could go to purchase a book regarding the passages you referenced.

If the comment was not spam, you may repost it with an explanation as to which topic you were referring to and why those Biblical passages (and even the book you were promoting) are germane. John or I will publish the comment at that time.

Family of Five said...

This is a complicated mess. But as you referenced, fraud by other bank partners was a big part of the Ramsey Town Center deal. Look up Community National Bank in North Branch and you will see that father and son will be spending some time in prison for various federal bank offenses. Community National was the lead bank on this deal and there are also ties with their involvement with Nedegaard and his demise when the details of the fraud came out.

I don't dispute that there are troubles at Minnwest but the Ramsey deal should not be the lone indication of bad lending practices on their part.

I don't have any stake or ibnside knowledge of Minnwest but as a banker I can tell you that the commercial real estate concentration of 403% is probably due to their capital declining from loan losses(denominator)and not their commercial real estate loan volumes increasing.

The Hawthorne Hawkman said...

@ Family of Five:

I agree that Minnwest's role in the Ramsey Town Center should not be overstated. It appears at this point that they were not involved with the fraud that happened there and were left with the unsavory task of cleaning up the mess.

Here's the connection though: Dream Homes - failed business with fraud involved, not entirely clear if the Koenigs participated or knew about the fraud or if they were victims themselves. They claim (Much like Minnwest with Ramsey Town Center) that the other parties engaged in fraud without their knowledge.

If the Koenigs or anyone else associated with Pamiko and various LLC's is found to have engaged in fraud, my guess is that we'll see Minnwest claim to be just another victim of that unscrupulous behavior. Even if that is indeed the case, at what point does a community have the right to say that Minnwest displays a pattern of negligent lending that has harmed our community?

Slumlords, mortgage fraud, and the financial institutions that enable such behavior have ravaged our community for far too long. It's high time we send the message that if you do this you will be held accountable.