As we discussed in Parts 1 and 2, it sure looked like BankUnited was a “success” on paper. Its mortgage portfolio (the value of loans the bank held) had escalated from $ 6.1 billion in 2004 to $ 12.5 billion by 2007. (Unfortunately, some 70% of their entire portfolio was based upon Option ARM’s.) A few months later, the value of these Option ARM loans were equal to almost 6 X the entire capital held by the bank. (Capital is the money the bank has on hand to insure against failure; it is not the same thing as the bank’s assets [which would be the loans, in this case]- but if the assets are homes subject to mortgages that exceed their worth, you can see the obvious problems.) By the spring of 2008, 92% of BankUnited’s Option ARM’s were underwater. And in 2009, BankUnited was taken over by the Feds.
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