OTS Closes Downey, Top 40 Ranked Lender, Sells it to USB

On Friday night the Office of Thrift Supervision closed Downey Savings and Loan of California, a top 40 ranked residential lender, and once a large player in the subprime and alt-A markets. The Federal Deposit Insurance Corp. was named receiver of the thrift and immediately sold Downey and another ailing depository, PFF Bank & Trust of Pomona, to U.S. Bancorp of Minneapolis, which operates the nation's 11th largest mortgage banking company. The bank promised to implement a loan modification program for ailing residential borrowers at the two thrifts. According to a statement put out by FDIC, USB will purchase "virtually" all of their assets under a loss sharing agreement with the government. Downey had $12.8 billion in assets, PFF $3.7 billion. USB will assume the first $1.6 billion in losses on select asset pools at Downey and PFF.