Nov. 13 (Bloomberg) -- Downey Financial Corp. was told by U.S. regulators to raise capital by year-end or face seizure. GMAC Bank can't install an ATM on property controlled by its biggest owner without getting federal permission. Community National Bank was forced to fire its two top executives.

They're among almost 50 lenders prodded to make changes as regulators try to contain the biggest wave of bank collapses since 1993. In some cases, failure to comply can trigger a government takeover, and some banks had deadlines as short as five days.

Regulators are using voluntary agreements, notices and outright orders to force action amid the worst financial crisis in 75 years. Nineteen banks have failed so far this year, led by the record-setting collapse of Washington Mutual Inc., and Wachovia Corp. avoided an even bigger bankruptcy in September when regulators ordered the Charlotte, North Carolina-based company to find a buyer.

``You are definitely going to see an increase in cease-and- desist orders and enforcement actions,'' said Gerard Comizio, a senior partner at Paul Hastings Janofsky & Walker LLP and former deputy counsel to the Office of Thrift Supervision in Washington. ``The regulators, at this point, are going to be under the gun to show they are taking prompt measures to address the problems.''

Agencies and bankers decline to disclose every order or agreement, citing a need to avoid shaking the confidence of depositors and customers. At least 17 banks operated under cease- and-desist orders and 12 signed voluntary agreements this year, data compiled by Bloomberg show. The Fed alone has announced 29 agreements with banks this year, almost triple last year's total.

Multiple Regulators

The figures are based on filings from the U.S. Securities and Exchange Commission, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and OTS. Some firms are subject to more than one order. The OTS, OCC, the FDIC and state agencies share regulation of almost 8,500 U.S. banks based on the type of charter the institutions filed.

Lenders such as National City Corp. of Cleveland and Hanmi Financial Corp. in Los Angeles have so-called memorandums of understanding, billed as voluntary agreements that identify steps that must be completed by a deadline. Other banks receive notices calling for ``prompt corrective action'' from the OCC.

The notices are ``formal enforcement actions used when a bank is undercapitalized or worse,'' and are preferred over cease-and-desist orders, OCC spokesman Dean DeBuck said in an e- mailed statement. Such orders ``enhance'' efforts to spur a bank into action because failing to comply ``is a ground for receivership,'' according to the agency's Policies and Procedures Manual.

`Fender Bender'

A cease-and-desist order is used when a lender has taken actions deemed ``unsafe and unsound,'' according to the Fed's bank supervision manual.

The savings and loan crisis in the 1980s and early 1990s was thought to be the ``defining financial crisis of a lifetime,'' Comizio said. ``That is starting to look like a relative fender- bender compared to what's going on this year,'' he said.

Downey, a mortgage lender in Newport Beach, California, said Nov. 10 it might be seized because it probably can't comply with an OTS order to raise capital by the end of the year. The company hasn't posted a profit since the middle of last year. Downey spokeswoman Elizabeth Stover declined to comment.

At Community National, an ``undercapitalized'' institution in North Branch, Minnesota, the OCC ordered the bank in June to ``immediately dismiss'' William Sandison and Ross Sandison as chief executive and president. The father and son were told to return any bank property -- from keys to premises to fax machines -- and cancel all benefits, including club memberships. OCC spokesman Kevin Mukri declined to comment on the reasons. Community National's deposits fell 26 percent to $67.4 million as of June 30 from a year earlier, FDIC data showed.

Kept at a Distance

The Sandisons didn't do anything wrong and aren't seeking to return to the lender, according to their lawyer, Mark Larsen. Bank spokeswoman Sara Mauch said Nov. 5 a new executive has been hired and declined further comment.

At GMAC Bank, regulators banned the Midvale, Utah-based unit of GMAC LLC in July from hiring anyone with ties to GMAC majority owner Cerberus Capital Management LP or its co-founder Stephen Feinberg without permission. The bank can't open a branch, office or automated teller on property ``owned, leased or occupied by a Feinberg Entity,'' the FDIC wrote.

The regulatory order is tied to an extension GMAC was granted in retaining control of the bank and ``not related to the health at all,'' said Gina Proia, GMAC spokeswoman. The bank was profitable as of Sept. 30 and had sufficient capital, according to FDIC records. GMAC LLC, which finances car sales for General Motors Corp., has been beset by speculation about its solvency.

`Well Capitalized'

``The bank is well capitalized, it has a strong management and governance,'' she said. ``The deposits have been increasing within the regulatory guidelines.''

Generations Bank of Phillipsburg, Kansas, was told to merge or sell the lender within five days in an Oct. 23 OTS cease-and- desist order. The board ``shall enter into a binding'' agreement to dispose of the bank, or to ``sell substantially all of the association's assets and liabilities'' and liquidate. As of Nov. 11, the bank was still in business. The bank's owner, insurer Brooke Corp., sought bankruptcy protection in October and attempts to reach its chairman, Robert Orr, were unsuccessful.

``The role of the regulator is to maintain the stability in the financial system,'' said Andrew Marquardt, an analyst at Fox- Pitt Kelton Cochran Caronia Waller and former examiner with the New York Federal Reserve Bank. ``They're not there to make forecasts about an institution's viability.''

Freedom, Security

WaMu, Main Street Bank, Meridian Bank, Freedom Bank and Security Pacific Bank had all been operating under orders when seized by regulators. While Marquardt said there's no direct connection, the orders do put people on notice that ``the clock's ticking,'' said John Ziegelbauer, national managing partner at accounting firm Grant Thornton.

``There's an accountability,'' Ziegelbauer said. ``If they don't put a plan together that's acceptable to correct it, bad things happen.''

To contact the reporter on this story: Linda Shen in New York at lshen21@bloomberg.net

Last Updated: November 13, 2008 08:00 EST