Early Internet Bank Shut Down By The Feds Over Mortgage Defaults
from the ouch dept
If you remember the earlier days of the web, you'll probably remember NetBank, which was one of (if not the?) first internet-only banks out there. It offered high interest rates in the early days, making it popular with online folks in the late 90s. To be honest, I hadn't heard much about it lately and wouldn't even have known if it still existed until I read that the FDIC was shutting the bank down after it had too many mortgage defaults. The FDIC, of course, insures bank accounts up to $100,000 -- and all of the insured accounts are going to be transferred to ING (another popular online bank). Unfortunately, it appears that more than a few people had more than $100,000 in their accounts, totally around $109 million in accounts that were uninsured. For the folks who had more than $100,000, they now need to get in line with various other creditors for whatever is left of NetBank -- meaning that they'll probably get pennies on the dollar. While some may paint this as a sign of problems with internet-only banks, it sounds more like the problem was in how NetBank chose to approve mortgages -- an area it was hardly alone in screwing up over the last few years.