10 Who Had a Rough Year
December 30, 2014 4:00 PM
Some paid hefty fines, others lost the confidence of investors and a few respected industry leaders suffered untold damage to their reputations. Here are 10 individuals, groups of people and companies who are happy to see 2014 end and look forward to better days in 2015.
William Erbey, former Executive Chairman, Ocwen Financial
This was a forgettable year for Erbey, the head of the nation's largest nonbank servicing firm. First, New York regulators' investigation into Ocwen's foreclosure policies essentially forced the company to call off its deal to buy $39 billion of mortgage servicing rights from Wells Fargo. Then the national mortgage settlement monitor launched his own investigation into whether Ocwen backdated foreclosure documents and prevented struggling borrowers from modifying their mortgages. Finally, as a condition of Ocwen's $150 million settlement with New York regulators announced in December, Erbey was forced to resign as executive chairman and sever ties with the company he founded and ran for three decades. Erbey's wallet is also a lot lighter these days. Much of his wealth estimated at $1.2 billion a year ago is tied to Ocwen stock, which is down more than 70% for the year.
Cybersecurity Chiefs
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Peyton Patterson, former President and CEO, Bankwell Financial
Personal finance issues spelled professional doom for Patterson in 2014. She drew unwanted attention in June when the Hartford Business Journal discovered that the then-CEO of Bankwell Financial had been ordered by a judge to pay more than $350,000 to address unpaid credit card bills. Patterson, also hit with court orders to make restitution to two country clubs, resigned from Bankwell less than two months later. "I am incredibly proud of what we achieved during my time at Bankwell and did not want my personal matters to overshadow the accomplishments and hard work of our team," she said in a press release.
Sen. Tim Johnson
Johnson, D-S.D., the outgoing chairman of the Senate Banking Committee, fought a tough battle to overhaul Fannie Mae and Freddie Mac, but the effort ultimately unraveled at the hands of his own party. Johnson and his staff worked for months with Sen. Mike Crapo, R-Idaho, and other members of the committee to move legislation based on a plan by Sens. Bob Corker, R-Tenn., and Mark Warner, D-Va. But more liberal Democrats on the panel refused to back the bill, citing concerns about affordable housing and fair access to the market. Johnson is retiring from the Senate in January.
Debt Collectors
This was the year that debt collectors got hit from every side. Whether it was in auto loans , student loans , payday loans or furniture stores , the Consumer Financial Protection Bureau made debt collection enforcement actions a major priority. The Federal Trade Commission hammered debt collectors over lax data security. States such as New York and Maryland implemented reforms. The debt collection industry did win a minor victory when the CFPB delayed writing new industrywide rules, but that reprieve is likely to be short-lived; the consumer agency plans to release a proposal on debt collection in April 2015.
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Alessandro DiNello, President and CEO, Flagstar Bank
DiNello took over as CEO of the embattled Flagstar in mid-2013 and quickly won praise from investors for slashing overhead and settling mortgage repurchase claims with Fannie Mae and Freddie Mac. But the positive momentum subsided in late September when the Troy, Mich., bank was ordered by the Consumer Financial Protection Bureau to pay $37.5 million in fines and restitution to settle allegations that it took too long to process foreclosure documents and failed to provide adequate relief to struggling borrowers. The upshot: Flagstar reported a $27.6 million loss in the third quarter and its stock is now trading at roughly 30% below its 52-week high.
Oil-State Bankers
The collapse of oil prices late in 2014 was a cause for concern for many banks in Arkansas, Louisiana, Mississippi, North Dakota, Oklahoma and Texas. Nine publicly traded banks in those energy-dependent states tracked by FIG Partners saw their stocks fall more than 10% from late November to mid-December. Among the hardest hit were Cullen/Frost Bankers in San Antonio and BOK Financial in Tulsa, whose shares fell to near 52-week lows before rebounding slightly. First Guaranty Bancshares postponed its initial public offering , and Wells Fargo and Barclays were unable to syndicate a big energy-related loan . The outlook is mixed with crude oil hovering above $50 per barrel; some argue that banks have historically overcome oil-price swings, while others say the volatility has exposed some reckless lending practices that won't be easily fixed.
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CertusBank's Former Management Team
The downfall was swift for the founders of South Carolina's CertusBank. Three years ago, this highly regarded group of Bank of America and Wachovia veterans raised $500 million to start the bank at a time when regulators were granting few new charters. But the bank was mismanaged from the start, and two weeks after American Banker published a story in March detailing the company's questionable spending habits including huge sums for executive amenities and payments to a consultancy owned by its founders Certus' board of directors fired the three top executives. A fourth founder resigned shortly thereafter.
Medallion Financial
Medallion's primary business is financing the purchase of taxicab medallions in New York and other major cities, and it was a highly profitable niche when medallion values were going nowhere but up. But investors are starting to worry if the business model is sustainable as the likes of Uber and Lyft encroach on taxi drivers' turf. In New York, taxi medallion values have fallen by roughly 20% since mid-2013, to roughly $840,000, and that's not great news for a company whose loan portfolio is largely tied to those values. It's not great news for shareholders, either; since this time last year, shares of Medallion have fallen by roughly 32%.
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Joseph Stilwell
Stilwell, one of the busiest of activist investors, has a strong record of winning proxy fights, but 2014 was not one of his better years. In 2013, Stilwell won a board seat at Malvern Bancorp in Pennsylvania, forced out the CEO of First Financial Northwest in Washington and blocked a merger between HopFed Bancorp in Kentucky and Sumner Bank & Trust in Tennessee. But in 2014 he failed to place a director on the boards of two companies he targeted, Harvard Illinois Bancorp and Poage Bankshares in Kentucky. Meanwhile, Stilwell remains locked in a legal battle with the Securities and Exchange Commission over alleged fraud at his hedge.
