Regulators Shut Mississippi Savings & Loan; Say It Used Brokered Funds for Questionable Loans

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WASHINGTON -- The Federal Home Loan Bank Board on Tuesday closed a Mississippi thrift institution that relied heavily on brokered funds to finance questionable loans.

Federal officials shut American Savings and Loan Association, Biloxi, and immediately transferred its 771 accounts to Security Savings and Loan Association, Jackson, Miss.

The S&L was closed after the Bank Board declared it insolvent and in an unsafe and unsound condition.

American Savings was flush with funds from out-of-town money brokers, the Bank Board said.

Brokers supplied American Savings with more than $12.1 million, or 77.5%, of American Savings' $15.l million deposit base as of Dec. 31, 1983, according to the Bank Board.

A recent federal examination revealed that American Savings engaged in questionable lending practices, including speculative construction loans, second mortgages, and time-share loans, the Bank Board said.

The Bank Board added that it is investigating the mississippi S&L's recent activities to determine whether any federal laws or regulations were violated.

Federal agents are trying to determine whether American Savings disregarded a regulation limiting the amount a thrift institution may lend to a single borrower.

A Bank Board official said the thrift also was heavily involved in high-risk construction lending, had severe underwriting deficiencies, and had loans secured only by time-share paper -- that is, collateral based on time-share property that is not a tangible asset, but a period of time spent in a vacation property. …