Loans not under OCC review

by

Published: May 20,2002

MEMPHIS, TENN. — Despite allegations reported elsewhere, loans from Union Planters Corp. (NYSE: UPC) are not under review by the Office of the Comptroller of the Currency, which charters, regulates and supervises national banks.

“It’s a non-issue,” said UP spokesman Charles Boyce. “The real story is that the bank is doing very well and is very focused on meeting customers’ needs. We recently announced a three-for-two stock split, had a record earnings quarter, a very positive annual meeting and have achieved very significant, positive results.”

Rumors circulated after Gary Moore, a former bank employee who worked as a central correspondent manager from January to October 2001 in the bank’s now-defunct equity lending division, made allegations against UP to the OCC in a Feb. 8 letter. Moore claimed that the bank attempted to sell 21,000 high-interest loans to GMAC Financial Services and Fannie Mae. After a year, both institutional mortgage buyers sent back the loans when they discovered disclosure violations.

Moore said the bank was misleading borrowers by not explaining that the loans fell under federal guidelines that required UP to have borrowers sign documents acknowledging that the loans carried broker fees of more than 8% of the principal and interest rates. Moore claimed they ranged from 8% to 15% and told the OCC that even though he didn’t believe the violations were intentional, “the cover up is.”

“We haven’t done and aren’t doing an investigation on this matter,” said an OCC spokesman, who added that thousands of complaints are received each year. “We have already clarified that.”

The bank initiated an internal investigation last November about the loans in question — first and second mortgages worth more than $1 billion — and the correction process is almost complete, said Boyce.

“The OCC is aware of the situation and they’re comfortable about the way we’ve handled it,” he said. “Inadvertent situations like this come up in banks from time to time. This is very small in comparison to total volume done on an annual basis.”

Last year, UP processed approximately $13 billion in consumer loans.

Boyce said the loans in question were geographically spread throughout UP’s service area, which includes 764 banking offices in Alabama, Arkansas, Florida, Illinois, Indiana, Iowa, Kentucky, Louisiana, Missouri, Tennessee, Texas and Mississippi.

When asked how the discrepancies were discovered and who discovered them, Boyce said it wasn’t bank policy to “discuss any arrangements or transactions with business partners and entities.”

“But we have an ongoing process through lending to review every loan, to make sure customers have signed everything necessary and that the bank has done everything consistent with that process,” he said. “Even though we train our people how to do documentation and give them necessary tools, such as disclosure guides, it’s a very lengthy and complex process and it’s possible for us to have situations in which we need to make adjustments.

“In this situation, we identified that we needed to review a group of loans. In a portion of those, we found we had to make adjustments and we took care of it to make sure we resolved the matter with our customers.”

Initially, UP offered borrowers loan refinancing, Boyce said.

“But it was very difficult to reach the borrowers, so UP made minor adjustments and sent a refund to customers that needed one,” he said.

Lou Ann Poynter, the bank’s senior executive vice president of mortgage banking at UP’s mortgage loan office in Hattiesburg, is supervising the correction process.

When asked to comment on Moore’s letter, Boyce said, “I can’t speak for Mr. Moore and I’ve never met him. We don’t discuss security measures at the bank.”

Two major business publications — Fortune and Forbes — recently listed UP among their highest performing public companies. Fortune placed UP at No. 489 on its 500 largest U.S. companies list while Forbes ranked the company No. 227 on its composite ranking. Among Fortune 500 companies, Union Planters ranks No. 105 in total return to investors during the period from 1991 to 2001. The company is included in the S & P 500 Index.

On April 18, when the bank announced a three-for-two stock split and reported an 18% rise in first quarter earnings, investors and analysts did not seem concerned about the loans in question.

“I’m not expecting much of an impact to their bottom line from it,” said Kevin Reynolds, analysis for Morgan Keegan. “When I talked to the company, they gave me comfort in general that it was not as serious as the stories sounded. They were telling me it was more of a matter of regulatory disclosure and that if you make good on the disclosure, then everything’s OK. I will have to say that I haven’t had a chance yet to talk to regulators and look at the books.”

Contact MBJ contributing writer Lynne W. Jeter at (800) 993-3392 or lwjeter@yahoo.com</a.

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