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Category Archives: FDIC Related Issues

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SEC APPROVES NEW CROWDFUNDING RULES

Posted in Corporate Finance, FDIC Related Issues

On October 30, 2015, the Securities and Exchange Commission (“SEC”) adopted final crowdfunding rules to implement Title III of the bipartisan Jumpstart Our Business Startups Act (“JOBS Act”). An alternative to traditional financing, “crowdfunding” involves soliciting small monetary contributions from a large number of people, typically through the internet. Previously, crowdfunding platforms violated the Securities… Continue Reading

IBERIABANK v. Beneva

Posted in Banking Operations, FDIC Related Issues, Special Assets Litigation

When an institution acquires a failed bank from the FDIC as Receiver and then faces litigation arising from the failed bank’s loans, FDIC “special powers” can often be asserted by the institution, as assignee of the FDIC as Receiver, to bar certain claims or defenses brought by the borrowers.  In November 2012, the United States… Continue Reading

Operation Choke Point

Posted in Banking Operations, Commercial Lending, FDIC Related Issues

As part of a coordinated, multi-agency initiative known as “Operation Choke Point,” the Federal Deposit Insurance Corporation (FDIC) has warned financial institutions that they might be liable for maintaining banking relationships with certain “high risk” businesses and customers.  Specifically, the FDIC expressed concern about relationships between banks and payment processors who use their deposit accounts… Continue Reading

Bankruptcy Trustee Lacks Standing to Bring Derivative Claim Against Bank’s Directors After Bank’s Closure and Receivership by FDIC

Posted in Bankruptcy, FDIC Related Issues

In April of 2010, the Office of the Comptroller of the Currency closed First National Bank Myrtle Beach, S.C., a wholly-owned subsidiary of Beach First National Bancshares, a bank holding company, and named the FDIC as its receiver.  As a consequence of the bank’s failure, Bancshares filed for Chapter 7 bankruptcy.  Shortly thereafter, the Trustee… Continue Reading

FIRREA Protects Purchasing Banks Against Some Claims Disguised as Affirmative Defenses

Posted in FDIC Related Issues, Special Assets Litigation

As previously discussed on this blog, the Financial Institutions Reform, Recovery, and Enforcement Act (“FIRREA”) creates a mandatory administrative claims process  for claims against the assets of failed financial institutions.  If a party with a claim against a failed bank does not comply with FIRREA’s requirements, then that party is generally barred from later raising… Continue Reading

A Potential Defense for Purchasing Banks Against Lender Liability Claims Based on the Actions of a Failed Bank

Posted in FDIC Related Issues, Special Assets Litigation

Previous posts discussed how the Financial Institutions Reform, Recovery, and Enforcement Act (“FIRREA”) creates a mandatory administrative claims process for claims against the assets of failed financial institutions.  If a party with a claim against a failed bank does not comply with FIRREA, then that party is barred from later bringing that claim in federal… Continue Reading

Claims Against Failed Banks Must Go Through the FDIC’s Administrative Claims Process

Posted in FDIC Related Issues

As described in a previous post, the Financial Institutions Reform, Recovery, and Enforcement Act (“FIRREA”) requires that anyone with a claim against a failed bank must file a claim with the FDIC within 90 days of being notified (either by mail or by newspaper publication) of the FDIC’s administrative claims process. Claims that must go… Continue Reading

The FDIC’s Administrative Claims Process for Failed Banks

Posted in FDIC Related Issues, Residential Foreclosure, Special Assets Litigation

Enacted by Congress after the Savings and Loan Crisis of the 1980s, the Financial Institutions Reform, Recovery, and Enforcement Act (“FIRREA”) gives the FDIC sweeping authority to resolve the problems posed by a failed financial institution. This authority includes a mandatory administrative claims process to help the FDIC efficiently identify all claims against the receivership… Continue Reading

Discovery of Loss-Share Payments in Litigation: Public Policy

Posted in FDIC Related Issues, Special Assets Litigation

Financial institutions seeking to challenge discovery relating to Loss-Share Agreements and payments from the FDIC should be able to do so on the grounds of relevance, as we previously discussed. A second argument against such discovery is based on the public policy underlying Loss-Share Agreements. Reducing a creditor’s claim based on the amount that it… Continue Reading

FDIC Loss-Share Agreements: Branch Banking & Trust Company v. Kraz, LLC

Posted in FDIC Related Issues, Special Assets Litigation

There is a common misconception among borrowers that the application of Loss-Share Agreements may result in “windfalls” to institutions that acquire assets of failed banks from the FDIC. They reason that the acquiring institution will receive both reimbursement for its losses from the FDIC and recovery from the borrowers.” However, this inaccurately depicts how Loss-Share… Continue Reading

Discovery of Loss-Share Payments in Litigation: Irrelevant

Posted in FDIC Related Issues, Special Assets Litigation

In foreclosure actions based on assets of a failed bank, borrowers sometimes attempt to discover whether and how much the FDIC has reimbursed the acquiring institution for its loss under the loan. In doing so, borrowers hope to claim that their liability for the debt should be set-off by any amount the acquiring institution has… Continue Reading

FDIC Loss-Share Agreements: Overview

Posted in FDIC Related Issues, Special Assets Litigation

Once a bank’s primary regulator has determined to close a bank, the Federal Deposit Insurance Corporation steps in to “resolve” it, usually by accepting appointment as the bank’s receiver. Before being formally appointed, the FDIC has typically engaged in substantial evaluation of the bank’s assets and liabilities and solicited bids from solvent banks or other… Continue Reading