$1-Billion Houston S&L; Closed Due to Poor High-Risk Loans
The Federal Home Loan Bank Board on Friday closed the $1-billion Mainland Savings Assn. of Houston, saying the institution was insolvent because of a number of bad construction and real estate loans.
Insured accounts were transferred to Allen Park Federal Savings & Loan Assn., a new federally insured association that will reopen all of Mainland’s former branches on Monday, said Marti Badila, a spokeswoman for the bank board.
Depositors who had uninsured funds at Mainland will get a percentage of their money after the association is liquidated, she said.
Called Largest S&L; Failure
Badila said it was the largest failure of an American savings and loan association in U.S. history.
Mainland’s growth from $308 million in assets in October, 1983, to $1 billion at the end of 1985 was funded largely by brokered deposits, in which institutions offer above-market interest rates to attract deposits, Badila said.
The institution issued more than $643.3 million in high-interest jumbo certificates of deposit to various individual and institutional investors, she added.
Under State Control
The thrift’s insolvency was the result of an “aggressive program of high-risk, poorly underwritten land and construction lending,” Badila said.
Mainland, a state-chartered stock association with eight offices, has been operating under state supervisory control for six months, she said.
In Houston, the number of real estate foreclosures so far this year has surpassed last year’s record by 74%, with single-family homes making up the bulk of foreclosures.
Mainland Savings posted Houston real estate valued at more than $106 million for foreclosure this month.