FDIC Worried about Construction, CRE Defaults

The Federal Deposit Insurance Corp. is re-staffing its resolution and receivership division as it prepares for an increase in bank failures and the retirement of its veteran bank closers.

"We are taking the prudent steps that are necessary to ensure we can meet any challenges," FDIC spokesman Andrew Gray said.

The agency is seeking 138 new hires for 69 permanent and 69 temporary positions in the division that is responsible for closing or merging insolvent banks and thrifts, paying off depositors and selling assets.

These are highly specialized positions and the FDIC is hoping to attract some applicants that worked for the Resolution Trust Corp. during the savings and loan crisis.

Rising defaults on single-family mortgages and construction loans has bank supervisors on edge and anticipating a spike in bank failures this year.

Many builders are struggling financially and non-current one-to-four family construction and development loans nearly doubled during the fourth quarter to $8.7 billion. FDIC economists are concerned the default rate, currently at 4.25%, is going to go higher.

Some 500 federally insured institutions have residential construction loans on their books that exceed total capital.

The percentage of non-current single-family loans rose from 1.57% in the third quarter to 2.06% in the fourth quarter, the highest level in 17 years.

The regulators also are watching community banks with high concentrations of commercial real estate loans.

Three insured banks failed in 2007 and the FDIC has already handled two small bank failures this year. As of year-end 2007, the FDIC had 76 insured depositories with $22.2 billion in assets on its problem bank list.

The FDIC resolutions and receivership division currently has 223 employees. "About half will be eligible to retire in the next five years," Mr. Gray said. "We need new permanent staff to replace those individuals and bring them aboard now to ensure we have a stable institutional knowledge base moving forward." (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/

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