Bulletin: SLS2023004

Dear Associates:

This bulletin advises you of recent events regarding the failure of Silicon Valley Bank and Signature Bank, their takeover by the Federal Deposit Insurance Corporation (FDIC) as receiver, and underwriting guidance relating to transactions with these entities and their successor bridge banks.

Silicon Valley Bank closure and the new Silicon Valley Bridge Bank, N.A.

On Friday, March 10, 2023, Silicon Valley Bank, located in Santa Clara, CA, was closed by the California Department of Financial Protection and Innovation. The FDIC was appointed as receiver. On Monday, March 13, 2023, the FDIC transferred all deposits and substantially all the assets of the former Silicon Valley Bank to a newly created, FDIC-operated ‘bridge bank’ - Silicon Valley Bridge Bank, N.A.

A bridge bank is a federally-chartered national bank established by the FDIC to take over and maintain the banking services of a failed bank. The bridge bank operates as an ongoing banking enterprise pending the FDIC’s ultimate resolution of the failed bank and its assets.

Depositors and borrowers of the closed bank automatically became customers of Silicon Valley Bridge Bank, N.A. The FDIC advises that Silicon Valley Bank’s official checks will continue to clear.

The FDIC provides FAQs that include guidance for loan payments and loans in progress regarding Silicon Valley Bank, available here. This web page also includes a call center number and secure methods of communicating with the FDIC and the bridge bank Support Center in writing.

Signature Bank closure and the new Signature Bridge Bank, N.A.

On Sunday, March 13, Signature Bank, located in New York, NY, was closed by the New York State Department of Financial Services. The FDIC was appointed as receiver. The FDIC transferred all deposits and substantially all the assets of the former Signature Bank to a newly-created, FDIC-operated ‘bridge bank’ - Signature Bridge Bank, N.A.

Depositors and borrowers of the closed bank automatically became customers of Signature Bridge Bank, N.A. The FDIC advises that Signature Bank’s official checks will continue to clear.

The FDIC provides FAQs that include guidance for loan payments and loans in progress regarding Signature Bank, available here. This web page also includes a call center number and secure methods of communicating with the FDIC and the bridge bank Support Center in writing.

The Current Situation

This is a new, evolving situation. The bridge banks are in the process of implementing and refining their procedures. There may be unanswered questions. There may be changes in guidance as the bridge banks’ procedures are implemented. Please keep accurate records regarding your communications with the bridge banks’ representatives and the FDIC. 

The following requirements apply to a closed bank taken over by the FDIC and the successor bridge bank, unless approved by a Stewart Title Guaranty Company Underwriter:

Payoffs of Existing Loans

If you have received a payoff statement from a closed bank, obtain written confirmation from the FDIC or the bridge bank that the amount, payee, and wiring instructions are the same as stated in the original payoff. Any changes to any of these must be independently verified, as described below.

Lien Releases for Paid Off Loans

If you have paid off a loan to a failed bank or you pay off a loan now held by a bridge bank, please do not close the file until a discharge/release/satisfaction/reconveyance, as applicable, has been received and recorded. Please establish a tickler system for this. Please forward a copy of the release instrument to your underwriter. Please notify your underwriter if a release instrument is not received within a reasonable time period.

The FDIC also provides a dedicated web page to assist with obtaining a lien release where the loan was paid off to a closed bank, but the lien was not released: https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/lien/index.html

New Loans (Sales and Refinances)

Request written confirmation from the bridge bank of their intention to proceed with the loan. Verify receipt of instructions from the bridge bank (or ratification of prior instructions from the closed bank) and receipt of the loan funds.

Construction Loans (New and Existing)

Before issuing any loan policy insuring a construction loan, date down endorsement, or ALTA 33 Disbursement Endorsement to an existing loan policy insuring a construction loan, request written confirmation from the bridge bank of their intention to continue funding the loan. You must obtain approval from a Stewart Title Guaranty Company Underwriter before issuing any loan policy insuring a construction loan, date down endorsement, or ALTA 33 Disbursement Endorsement.

Assignments

Insuring an assignment of a mortgage previously held by a failed bank, now held by a bridge bank, requires a recordable assignment from the bridge bank.

Scams

Given the fluid nature of the situation, there is a heightened risk of fraud related to transactions concerning these banks. Please be alert to possible scams, in particular payoff scams involving wire fraud. These may involve altered or fraudulent wiring instructions, among other scams. New wiring instructions from a bridge bank, or changes in previously-received verified wiring instructions, must be independently verified through the FDIC’s authorized communications methods, available in the FAQs for each closed bank, or by communication with a verified loan officer at the bridge bank. 

FDIC Press Releases and FAQs

FDIC Press Releases and FAQs are available at this website: https://www.fdic.gov/news/press-releases/2023/

If you have questions about a transaction involving a closed bank or a bridge bank, or other issues not addressed by this bulletin, please contact a Stewart Title Guaranty Company Underwriter.

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