Reuters reports that Orange County’s Downey Financial, owner of Downey Savings …
… said on Monday its survival was in doubt because it may fail to raise enough capital to satisfy its regulators. In its quarterly report filed with the U.S. Securities and Exchange Commission, Downey said there was “substantial doubt” about its ability and that of its banking unit “to continue as going concerns for a reasonable period of time.”
The Newport Beach, California-based lender agreed with the federal Office of Thrift Supervision on Sept. 5 to raise new capital by the year-end and to provide an alternative strategy to ensure it could operate safely if it did not. While Downey said it bolstered capital by selling some real estate assets, it added that “in the current economic environment, there was a significant risk” it will not have enough capital at year end.
“The Newport Beach, California-based lender”
The OC collapse, just starting.
I hope they die a painfull death. Sweet justice. Bub by downey
Just starting? Bears have been marveling at Downey’s continued survival.
what disgusts me is we have no problem bailing out banks that create nothing other then refilling their mistakes with tax dollars. yet the auto industry asks for 25b and bush cant decide what to do. he is satan on earth, he is a traitor to america and the GOP, he is an example of why abortion should remain an option.
Downey deserves this. The owners, board, and managers are arrogant jerks.
look at Downey’s stock
http://finance.yahoo.com/q?s=dsl
They will probably be taken over by the FDIC on Friday after the close if not before that.
Sheila Bair, here she comes.
Let’s not forget that this quarterly report is prior to the October bailout approved.
I anticipate that Downey may actually be able to withstand these winds of change because of access to bailout capital. But who knows? Does anyone actually get to see the true financials on any of these entities?
not with the stock at 48 cents per share.
Marcia, despite the Oct bailout, 2 banks recently failed last week (remember Security Pacific?), so obviously, “access” to funds did nothing for them.
The problem is not access to bailout funds but rather the “new capital” requirement; it appears that the Feds do not consider bailout money “new capital” that would allow a bank to stay afloat. I assume that “new capital” means additional infusion of equity based capital as opposed to debt based capital, which is what accessing bailout funds would be. Unless they can convince the government to buy their shares like AIG.
The way they’re using the bailout money now makes it count as capital. The gov’t is buying equity in these institutions in exchange for their cash infusion. However, not everybody qualifies for this infusion.
I think banks with exceptionally weak balance sheets, and those which are deemed unable to transition their business away from handing out bad loans to more responsible banking, will be allowed to fail gracefully. Downey will be one of these, no question.
I am surprised that Downey has lasted as long as they did considering how many Alt-A Neg Am(Pick a Payment) loans they originated in the last few years, Every person I have ran into that has one of these is through Downey and most pay the minimum (Int. Only) It’s unfortunate that these loans weren’t fully explained to most borrowers when the LTV is greater than 120% you must started paying down principle and most really cannot afford to do so. More often than naught they are told not to worry by the Realtor or Loan Agent, because their property will appreciate at least 10% in a few months. I know-broken record………………….
Nah, banks are always overly pessimistic about the chances of their own survival. I am sure they will be just fine.
Should we take our money out of this bank ASAP? Will other banks going to buy them? I’m freaking out here because I have CD with them. If I take my money out now, what are my penalties.
Please help
Downey will be OK. They own a lot of commercial real estate. There building in Newport Beach along is worth $115 million. And they own all there branch buildings.
This is a response to Sniper and Jerry Mendoza and others like them: A bank is more than it’s top management. It’s also the face of the single mother or struggling student you meet at the counter or the secretary who is helping to support her elderly parents. I bet a lot of people of this or any failing company will also have their retirement savings devastated by the economic meltdown– leaving them little or nothing as back up and in an employment search with millions of others. Companies are also the people who work there. Perhaps Downey will fail or maybe it won’t. Perhaps management made bad choices. But please don’t gleefully hope and ptay that ordinary people will suffer. They are your neighbors, your friends, and your family members,
It’s a shame that the borrowers don’t read all the paperwork before signing it. Then they place the blame on the lender, saying “they didn’t tell me this was an interest only payment for a few years, then it will shoot up to more than I can pay a month”. It’s all stated in the paperwork, so who is really at fault for this “mortgage crisis” when Americans are living larger than they can actually afford?
The lenders are to blame for this crisis. More specifically, the lending institutions, the Wall Street banks which supported them, the rating agencies, and the investors which ultimately bought the mortgages. Oh, and the other banks and institutions which wrote credit default swaps on the mortgages when they didn’t have sufficient capital to back them up.
Face it, the average person is an idiot, and he (or she) makes decisions which he thinks will benefit him the most. He owes you nothing at all, and he doesn’t act in concert with the other idiots out there. Sometimes, he makes bad decisions, like paying way too much for a house and borrowing all of the money for the purchase. In 1999, he might have paid way too much for 100 shares of a dotcom stock, but that doesn’t make him responsible for the tech bubble.
The lending institutions, on the other hand, have a responsibility to their shareholders and depositors — if any — and to regulators, to lend money prudently. They failed miserably out of greed. Guys like my idiot above have always gone into banks to get a mortgage they couldn’t afford, and they were politely turned away. In the last few years, nobody was turned away, and the lending community failed in their role as gatekeepers.
You can’t blame borrowers collectively, because they didn’t act collectively. They acted as individuals. But a handful of institutions in the lending community, who we expect to know better, as we trust them with our money as shareholders or depositors, literally acted in bad faith by granting mortgages that no prudent lender would grant.
OC Citizen:
I’m glad you responded to the others regarding their negative comments, it’s so sad, how some people can sit there and say such thing as “I hope they die a painful death”?!?!? I mean who says that? I have just said a prayer for Sniper.. My heart goes out to those who have lost their jobs out there, and we’ll continue to pray that things will work out for everyone in the end.. God bless and be a blessing to others..
Usually people with little intellgence and live under there means have stupid comments to make. It’s a waste of a human. Furthermore, I am very concerned as this is where my mortgage is and money market accouts are. I would think these lending institutions have some type of responsibility to the people who are shareholders. This is truly a scary time in everyones life. People need to think strongly about their wants vs their needs.
concerned -
If your deposit accounts are under $100,000, I wouldn’t worry too much. They’ll be transferred over to another institution if and when Downey fails.
As for your mortgage, you have absolutely nothing to worry about — you already got and spent their money, so you would be fine even if the entire global banking industry melted down tomorrow and all banks closed.
Seriously, that mortgage is a valuable asset to the bank, and somebody is certain to take it over just like the cash in the vault. It’s like when Scrooge died and the young couple was happy because they would have another week or so before their loan got transferred to another moneylender.
To the rude people who are hoping on Downey’s collapse….who do you think you are wishing this on anyone?? I have been with the company for a year and a half; I wouldn’t wish unemployment on anyone…even on the idiots that are typing negative stuff on here. All institutions are in a bad spot right now. All I can do is roll with it.
You won’t find too many people shedding tears for what is happening to Downey. I know, I have been in the mortgage business for several years.
I have sat in the office of McCalister and Ms. Wolfe.
Believe me when I tell you they deserve everything they are getting. There is justice in the world.
Lots of arrogant people at that company and others in the industry know it. We are watching their demise with joy.
I had a Neg-Am loan through Downey and loved it! But of course I didn’t let it go Neg-Am…duhhhh!!!! AND, my loan was based upon a reasonable margin over COST-OF-FUNDS, not that volatile Libor or Treasury index.
It’s like figuring out that paying the minimum payment on your credit card each month doesn’t get you anywhere but broke, as opposed to paying it off, or paying it down. How hard is that to figure out?
The part I liked was the flexibility to pay anything between a 15-year amortization to 30-year, to interest only to minimum neg-am.
The neg-am piece was like getting a home equity loan without having to apply for or pay for it.
I find it hard to believe that it was so hard to figure that out, when they explained it very clearly on each monthly statement.
What tanked everyone wasn’t the Neg-Am loans, it was real estate values gone wild, thanks to the Fed lowering rates to false market rate of 1%. Neg-Am loans have been around for 20 years, and helped first time borrowers ALOT. It is a shame they’ve been thrown out with the bath water. I, for one, will miss their flexibility.
I heard that the actual CEO at Downey delivered a very somber message to the lower management at downey. It basically stated that the end is very close at hand. It was extremely sad. I feel for the staff and the workers at Downey. Yeah, maybe the figure heads were arrogant asses, but the last thing this county, state or country needs is another casualty. When will the blood shed end?
Ironic, the Downey Savings building will be empty by the 1st of the year and right across the street Fletcher Jones will have tumble weeds in the parking lot!!
I worked with DSL for 5 years in management, and I have immediate family that is still in management there!!! I can’t believe the ignorance in the above blogs. DSL was a very conservative lender. It has held on longer than most of banks that have collapsed in the past couple of months all while being the smallest. People give credit where credit is due. I never saw the arrogance of upper management. I think the real culprit of this shakey economy is the doings of our president of the past 8 years..maybe if gas didn’t cost $100 combined with the inflation epidemic and the umemployment crisis people could have afforded to keep their homes! btw FDIC insurance is 250K now!
That’s true - the FDIC limit was increased to $250,000 temporarily.
I disagree about Downey being very conservative, however. This very blog, I believe, cited a statement from Downey some time ago (1 or 2 years ago, maybe) where they said that they had substantially lowered the percentage of their originations that were subprime. A conservative lender would never have entered the subprime business to begin with.
The Original Jason
The message to to the workers was not somber. It was the oppisite. It told works to keep their heads up, and not to worry about things that they cannot control. They Upper managment are not asses, they are the oppisite. Downey is a great company, and I pray they can stay in business, or get bought by an east coast company that has similar values.
Everyone needs to do their research before they shoot their mouths off with such ignorance. If you actually educate yourself on the history, the government (NOT only the last 8 years) but during the CLINTON admin, (educate yourself on CRA) created demands on banks to do Subprime loans, the banks had to do a certain percentage of these loans or be penalized. Banks have to abide by government rules. Also, if you don’t do these loans you have crooked lying cheating agencies like ACORN suing the banks because they say they are discriminating. Also, when the Republicans were asking the Dems to look into the Fannie Mae/Freddie Mac nightmare, where was our congress? Oh yeah, getting huge kickbacks - let’s see, who received the most in Fannie kick backs? Dodd, Kerry and OBAMA!!! Don’t blame Bush - congress is the one’s you should blame and I mean both parties - If you educated yourself on that as well you would know that congress is the ones that gets things passed. But they were too busy the last two years filibustering everything that they just ignored the american people. Unless you educate yourself on the actual truths you should really stop talking out of your butt - and if you are going to slam Mr. McAlister, you should probably know how to spell his name CORRECTLY. By the way, I worked at Downey Savings 8 years ago and Mr. McAlister is the most down to earth person I’ve ever met. If you ask any employee at Downey Savings they would tell you that as well. You know that the Company is a good one when employees work there for over 20+ years. I can only pray for all the evil people who hope bad will on the innocent people working for Downey who will lose their jobs, etc. As for McAlister, he’s already gone and lost control of the bank, isn’t that enough hate for you? Do you really need to wish more on innocent employees and their family? Would you appreciate someone telling you they wish the worst for you and yours? Grow up and stop talking like idiots!
Disappointed -
I agree that no one should be hoping for a company to go under or for people to lose their jobs.
But, don’t blame any of this on the CRA, Clinton, Congress, Fannie, Freddie, or ACORN. Nobody told banks to lend imprudently. Look how many lenders in California are still doing fine. There are many credit unions, local banks, and regional banks which are doing fine. Yes, a lot of them are feeling the pain of the deflating housing bubble, but they have not been brought to the brink of destruction like Downey has.
Some lenders CHOSE, of their own free will, to make loans that I would charitably call questionable. They made a lot of money in fees on those loans, and figured they could just sell them to someone else and then it would be the investors’ problem. That became their entire business model, and now they are paying the price. Unfortunately, a lot of people who had nothing to do with the lending decisions are also paying the price.
It is total BS to blame any government agency for the bad decisions made by a bank’s management. You should be careful who you accuse of ignorance.
The Original Jason
bankworker “The message to to the workers was not somber”
I heard the message and it was somber. “There are serious doubts as to the viability of Downey to operate as on ongoing concern”. He even stated that the most likely scenario would be that Downey would be taken over by the FDIC before another buyer could be found. Absolutely he encouraged his staff to remain unbeat and committed. What was he supposed to say? The line for unemployment forms here?
I hope for the sake of the dedicated employees that they are all able to keep their jobs in some form or another. I agree that Downey is just another casualty of a faulty economic system that continued to spiral out of control with absolutely no oversight. However, lets not kid ourselves. These guys made a ton of money during the real estate boom. How is it that lay people could see the writing on the wall and these so-called banking professionals didn’t see this coming. “What goes up must come down”.
I want to disscuss with anyone who claimed the DSL would be shut down by Regulators soon. I have a different point from you guys. The reasons are as follows:
1)DSL still have enough liquid to cover foreseeable future.Why does a goverment shut down a company still running and providing jobs to so many people?
2)If the regulator shut down DSL, the FDIC will probably lose billions. However, if the regulator keep DSL running, the goverment only needs to spend a couple of hundred millions, or even doesn’t need to spend any money as long as changing their special capital requirement to DSL.
3)I don’t want to argue with you if those regulators have their own benefits to close this company, such as short this stock or bad relationship with old owners etc..
They may not be able to find a buyer themselves, but there may well be a shotgun wedding arranged by the FDIC. I don’t think they will let them just go under.
But, they are considerably smaller than IndyMac, WaMu, or Wachovia, so OTS and the FDIC might just pull the plug. If they are actually in such a precarious state that the FDIC would have to cover billions of dollars in deposits, then they are hardly a going concern.
The Original Jason
Pull your money out of this bank and sell your stocks now. This ship is about to sink like the titanic.
First portugese breakfast you are choking on your pork sausage . The stock is one thing. However, if you check the facts in the last year or so out of the 13 plus banks that have had to close all customers following the FDIC guidelines did not lose one nickel. So there is no reason to pull anything or go anywhere. One of the following two scenerio’s might take place. A. FDIC will show up run things for a while. or B. Some nice bank like Chase or Citi will step in and pick up Downey. Either way the doors will stay open. The safe deposit box owners will still be granted entry. The checking accounts will be sold and the cordless screwdrivers will still be give-aways. The most important thing is the countless efforts of the team members will still continue. Downey Savings might have to change their name but their spirit will live on with all their employees. They are the reason DSL has held their own for as long as it has. DSL has very dedicated team members, not to mention unwavering loyalty from it’s customers. This has been a mainstain no thanks to the media, newspapers and tv stations. It’s all about the sky is falling instead of just printing the facts. Instead of educating the public and giving them the tools to put themselves at ease like the FDIC estimator search engine or the FDIC 800 number so they know they are covered they would rather print/broadcast the doom and gloom headline. It places people in a panic mode which in turn has them running to remove their deposits which in turn puts any financial institution in a more vulnerable state. In closing DSL is one of the best financial institutions out there. They own many of their own branch buildings and other r e properties. The biggest travesty is that every time one person blogs a bogus fact or newspaper article or erroneous statement that’s what resonates with the public. Large sums of money walk out of the bank the next day based on those statements. The day after a retractment is printed on the newspapers website where no one reads it. Then the negative cycle starts all over again.
Sad it maybe for Downey Savings’ employees to be potentially laid-off, I still believe that they will be better-off being laid-off by DSL. Small as the company is, it is very bureaucratic. Yes, we were able to converse with the McAlisters, Rosenthals and other executive managers, but, these people cared more for growing their purses than their employees. Nepotism is the name of the game at Downey. Why in the world would they post somebody whose only experience is to raise goats, to its top IT position? Well, you guessed it, he is the son of a top executive !!!
Only when Downey’s president was replaced with one not selected by Mr. McAlister, were the employees kept upbreast of the company’s state of affair. This is the first time in Downey’s 50 years that the employees are being led by a respectable, qualified man with decency and respect for its employees.
I would take my money out of the bank before the FDIC comes in and the ATM machines stop working. The FDIC might cover, but why wait for your moneyn to pay your bills that are do now!
McAlister’s nepotism is the name of the game at Downey and always has been. From him to Wolfe, they have ruined people and now the chickens have come home to roost.
I hope they are all sued for the remainder of their lives by shareholders who will discover people were given jobs and promoted based on whether they were liked or not.
This has been a long time coming for Downey. In the end, evil will always get what’s coming to em.
Downey screwed people over for years…..and now they are getting double screwed. Good for them I say.
And Prince and the others are getting paid half a million and then some to keep a job they couldn’t get anywhere else right now. They couldn’t work for the minimum during this time of trouble could they?
No, the board approved big salaries for these jerks who will soon be out of job and they know they can’t find a job for that money anywhere else.
May they all get what’s coming to them in the end. And the board too.
I have no idea what happened to Downey. Their employees seemed very friendly and professionally proficient.
My wife and I have done business with them for a little over a year. Until I read this blog and then we pulled over $200k out last friday. I hope they hang in there untill the checks clear.
Downey and BKUNA in Coral Gables, FL have no franchise, thus there will be no one willing to take over their toxic waste. Banks like this have been nothing but big hedge funds, so they aren’t attractive to a larger bank. If Citi or some other idiot does take them over, you can bet the employees will still be left holding the bag. There are a couple of class-action suits against BKUNA because they misled investors. Maybe there should be one against the board and senior management of Downey as well.
i don’t like to see any one fall, but downey saving are bunch of crooks, they purchased my loan with a rebate of $11,800.00 from equity fin. group another bunch of demons, nothing was clearly explained to me. they took their money and did not look back . i have such a bad loan downey would not help me nor did they help any of my friends that have lost there homes, they are bad news. these people need to read the bible ” YOU REAP WHAT YOU SOW” sorry employees of downey when you work for the devil you you perish with him, you should have been more nice to the people that have lost their homes because of you. down with downey savings
Anyone that buys this bank is a knife catcher.
PREDICTION…… Downey Savings taken over by OTS in the next 5 days! Probably US Bank as a backstop.
For all of you that insist on persecuting the employees of Downey Savings, I truely feel sorry for you. My mom was underwriter with Downey for 6 years. She was a good an honest underwiter. She has also been laid off for the 3rd time in a year. Because of the market right now, she is unable to find a job and is currently on unemployment, yet again. The last time she was laid off, Downey closed their Complete wholesale division and laid off all employees employed in that sector along with a few hundred of the retail employees. I am truely shamed at the ones that have no feelings for the employees and their families (you know these people do have children and also need an income) that are now out of jobs and are unable to find one. I really wonder what this world has come to, Selfishness and hatred? Show a little compassion for the ones that are suffering.
I loved working for DSL!! I think they will make it… They have their own money. Go Downey!!
Downey Savings Owner and his followers screwed over a lot of people in their day.
And now…..they are screwed. It’s over. They are history. Done.
Justice never sleeps.
By the way, the branch retail banking people look like they will keep their jobs since they become US Bank Branches.
All Senior Management, Mortgage, Admin, etc? Your done. And to the owner and board and senior management……you got what you deserved.
# Donall Says: “Downey will be OK. They own a lot of commercial real estate. There building in Newport Beach along is worth $115 million. And they own all there branch buildings.”
Good, the FDIC and U.S. Bank will sell those buildings to pay the creditors.
Maybe you should read this.
http://mortgage.freedomblogging.com/2008/11/21/downey-savings-seized-by-regulators/3456/
to the lady that said we have no compassion for the people that were laid off at downey savings. sorry for them being laid off. how many people do you think downey savings put in the street before the lay offs? do you feel sorry for them, how many people are losing their homes today because of downey’s greed, you only feel sorry for yourself when things happen to you or your family members, think about the hundreds of people that have suffered because of their cheating lieing practices, mortgage fraud, when you pray, pray for all those that are hunting not just yourself, that’s the unselfess spirit to have
Downey s&l are heartless criminals. I have tried every angle to try to modify my loan, including paying a large sum of $. They dont modify
they dont work out anything! Is it because they stand to make more from insurance on the foreclosure? Then they will have my home as it rapidly loses value and sits empty. No wonder they lost half a billion and counting. The sooner they, or u s bank and the fdic forces them to work things out or modify, the sooner the overall housing market will get better. They can take everybodys home with an arm but it will not bring bake DSL. Yet nobody expects these scumbags(banks) to do the right-smart-best thing. Voluntary modification is a Joke! Even if they did it, it would not be good for consumers. Just another bad loan.
TO all you Jerks out there, everythings fine with my home-im a smarty pants-You should have not got the loan-you cant afford your home so get out, Attitude!
DO YOU REALLY THINK YOU WILL BE SAFE IN THE LONG RUN, AS YOUR PROPERTY VALUE IS FALLING WITH EACH FORECLOSURE
TO all you jerks at DOWNEY S&L, YOU KNOW WHO YOU ARE AND WHAT YOU HAVE DONE! KARMA WILL CATCH UP WITH yOU!
The days of classaction lawsuits, accountability, and prison time will come for you! And the people and the smartypants will know the truth, about the extent to which the american consumer have been taken advantage of, and deceived!
Hang in there!! MY prayers go out to all facing foreclosure at the hands of downey!
i try contacting Downey Savings to help me work out my loan but werent able to contact them because everytime i called they would say we dont have a supervisor to come to the phone, “they didnt want to help whatsoever till time they havent” me and my family are damn tired of how they treat people that are in search of help i hope they go bankrupt soon.