Yesterday, Taylor, Bean & Whitaker Mortgage Corporation filed for Chapter 11 bankruptcy protection after it was forced to shutter its mortgage lending operations earlier this month.

The Ocala, Florida-based company had captured 1.7% market share nationwide by creating $17 billion of mortgage loans from January to June, 2009. On that basis, it was the 12th largest mortgage lender in the U.S.

Taylor was also one of the largest U.S. home loan providers not owned by a large bank. As a result, there was lack of significant amount of deposits that could help cushion its capital position in the troubled market environment.

The company filed for bankruptcy due to recent actions taken against it by the Department of Housing and Urban Development, and mortgage financiers Freddie Mac (FRE) and the Government National Mortgage Association (Ginnie Mae).

Further, the negative developments at Taylor were related to various investigations surrounding the failure of Colonial Bank, which was Taylor’s primary bank for years. Colonial froze about 100 Taylor Bean bank accounts earlier this month.

On Aug 14, Colonial BancGroup was seized by the Federal Deposit Insurance Corporation (FDIC). It is the biggest bank failure so far this year, and the sixth-largest in U.S. history. Colonial’s $20 billion in deposits, 346 branches and about $22 billion of assets were sold to BB&T Corporation (BBT).

According to the bankruptcy filing, Taylor has more than $1 billion of both assets and liabilities, and between 1,000 and 5,000 creditors.

In the first half of 2009, bankruptcy protection filing increased 64% year over year to more than 30,000. Also, according to the American Bankruptcy Institute, the number of Chapter 11 business reorganizations increased 113% year over year to 7,396, and Chapter 7 business liquidations jumped 57% year over year to 20,375. Continued financial stress on both consumers and businesses due to the market turmoil was the reason for increase in bankruptcy filings this year.

Zacks Investment Research
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