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A total of $110.45 million loss was posted by Raleigh, North Carolina-based lender RBC Bank for its second quarter results largely because of its bank foreclosure list, based on data from the Federal Deposit Insurance Corp.

In the second quarter last year, RBC Bank posted a profit of over $13 million. This year, the bank provided $202.5 million in reserves for bad loans, an almost 200-percent increase from the bank’s bad loan reserves of only $53.5 million in the second quarter last year.

Aside from the increased reserves for bad loans, the bank also increased its net bad loan charge-offs from only $26 million in the second quarter last year to $113 million this year, representing a staggering 330 percent increase.

Out of the $113 million charge-offs, nearly $55 million represented residential loans used to purchase single family distressed houses while $36.3 million represented loans provided to home builders and developers for their land development and construction projects. The rate of net charge-offs compared to total loans increased from 0.49 percent in the second quarter last year to 2.l2 percent this year.

Non-current loans, which refer to loans delinquent by over three months, increased from $237.6 million in the second quarter last year to $1.1 billion in the same quarter this year.

For the first 6 months of this year, net charge-offs posted by RBC Bank reached $255 million, representing a substantial rise from the $75.2 million net charge-offs in the first 6 months of 2008.

According to RBC Bank chief executive Scott Custer and his top officers, the current loan and asset quality problems of the bank are largely caused by the operations of its Houston-based lending company RBC Builder Finance. This unit made huge land development and construction loans in nearly 20 states, including Georgia, Florida, California and other states battered by residential and commercial delinquencies and foreclosures.

Florida and California accounted for nearly 46 percent of all default and foreclosure filings in the U.S. in July. Georgia, meanwhile, was seventh in a ranking of state foreclosure rates in July.

Nonetheless, RBC Bank may received much needed help from its parent firm, the Royal Bank of Canada, which has released its income statements this week and showed that it increased its net income by 24 percent, surpassing predictions by financial analysts. With the Royal Bank’s strong performance, Canadian bank analysts have called on the parent company to take corrective actions at RBC Bank.

The $13.5-billion Guaranty Bank based in Austin, Texas will be closed by the Federal Deposit Insurance Corp. this week, marking the second-largest bank failure in 2009.

According to bank analysts, the bank was crushed by its option adjustable rate mortgage loans, which comprised nearly one-third of its single family home loan portfolio.

In addition, the bank had provided $1.2 billion in loans to homebuilders primarily in California, where many homes turned into repo houses for sale when borrowers failed to pay their home loans.

In the second quarter, Guaranty declared a loss of $174 million, according to a report from the Office of Thrift Supervision. The bank tried but failed to raise additional capital.

Shares of the bank have declined by over 95 percent since 2008. Among prominent stockholders are hotel businessman Robert Rowling and corporate investor Carl Icahn.

Guaranty would be the fourth Texas bank to fail after the collapse of the housing market. It would also be the second largest bank failure in Texas, based on FDIC reports. The largest in the state was the bank failure of $17.1-billion First Republic Bank of Dallas in July 1988.

According to some reports, Spain-based Banco Bilbao Vizcaya won the right to acquire the bank in a bidding.
Other banks reported to have filed their bids to buy Guaranty were the newly-chartered bank of Gerald Ford and his private equity partners, JPMorgan Chase and Toronto Dominion.

According to several analysts, Guaranty Bank’s failure is significant, but it is not as staggering as the failure of banks in the 1980s when the energy-industry-driven construction boom collapsed.

During the years from 1980 to 1994, 599 banks in Texas collapsed. In 1989, a total of 223 thrifts and other banks closed, equivalent to four bank failures every week.

Dick Evans, head of Cullen/Frost Bankers, said Texas now has fewer housing-related problems than other states because its housing sector, having learned from the crisis in the 1980s, did not allow home prices to shoot up. Cullen/Frost Bankers acquired some of the failed banks in the 1980s.

According to the Federal Housing Finance Agency, home prices across Texas declined by only 0.6 percent compared to 2008. Evans, however, said that while banks in Texas are holding up much better than those in other states battered by foreclosures, banks across the state expect slower growth.

More than 3,000 property tax liens in Toledo and in other areas of Lucas County which were sold by the county to private companies are expected to put more homes into repo house listings.

According to housing advocates, while local governments charge low interests and fees, private companies charge high interests and service fees. These later accumulate to thousands of dollars that distressed homeowners could not pay, ultimately forcing them into foreclosure.

Anita Lopez, auditor of Lucas County, said the county gained a cash windfall of $14.7 million by selling off over 3,000 tax liens to private companies. The money is a much needed gain as the city is struggling to find money to finance public services and schools. But in the long run, according to Lopez, the cost of large numbers of foreclosure properties will wipe out the short term gains of selling tax liens.

In contrast, investors insist that the sale of tax liens to private investors benefit all parties. They say that many struggling counties and cities across the country have been selling tax liens to the highest bidders to raise much needed cash for community services, such as fire departments, school districts and public parks.

They also explain that investors take on risky investments, but admittedly, these liens could turn very profitable for them. They pay local governments upfront for the tax liens and acquire the rights to foreclose on the tax delinquent properties and to impose high interest rates. They also take priority over banks that provided the home loans.

According to Howard Liggett, head of the National Tax Lien Association, profits from tax liens beat those earned from certificates of deposits. Liggett reported that tax lien investors earn approximately $10 billion each year.

Lucas County started selling its tax liens in 2006 to New Jersey-based Plymouth Park Tax Services, which is owned by JPMorgan Chase and which also uses the name Xspand.

Plymouth, which was once run by former New Jersey governor James Florio, ended with JPMorgan when it acquired Bear Stearns which earlier bought Plymouth.

Now, Plymouth is one of the biggest companies in tax lien investments. According to Plymouth officials, they have filed over 1,000 foreclosure cases against delinquent taxpayers, but have foreclosed on only 56 of them.

But housing advocates insist more foreclosures will arise from the tax liens, as tax debts amounting to $3,300 have quickly grown to $6,800 when the tax liens were sold.

The Federal Reserve has announced it would extend to the middle of next year its Term Asset-Backed Securities Loan Facilities to help the struggling commercial real estate industry. The TALF program would have expired this December 31.

Veterans who have taken out conventional loans, subprime loans, adjustable rate mortgage loans and hybrid ARM loans have until September 30, 2012 to refinance to loans guaranteed by the Department of Veterans Affairs.

The Ohio city of Huber Heights has decided to work with Dublin-based real estate developer DEC Investment Group for the development of a massive residential project called Carriage Trails on 625 acres of land in the city.

The pace of multifamily and commercial property lending slowed down in the second quarter, compared to the second quarter last year, but increased compared to the first quarter of 2009, based on a report from the Mortgage Bankers Association.

More and more homes priced between $4 million and $7 million are being sold at foreclosed homes auctions because they are not getting sold through regular channels, according to Jim Gall, head of Auction Company of America.

The luxury hotel condominium Trump International Hotel and Tower in Fort Lauderdale, Florida is facing foreclosure, heavily burdened by unpaid construction loans amounting to $182 million.

Freddie Mac posted its first net income in 2 years in the second-quarter report it filed with the Securities and Exchange Commission despite losses to foreclosures homes.