BankUnited FSB's failure Thursday represented the end of an era, as the last of the large savings and loan institutions that forayed heavily into mortgages that allowed borrowers to pick what they wanted to pay on a monthly basis during the housing boom was shut down.

BankUnited FSB, which was acquired by a private equity consortium after being closed by regulators on late Thursday, was a subsidiary of BankUnited Financial ( BKUNA). The lender had a heavy exposure to option-payment adjustable-rate mortgages, which had earlier spelled doom for other big lenders like the failed Washington Mutual and troubled Countrywide Financial and Wachovia, both of which were acquired last year.

Option-ARMs typically featured three monthly payment options. The lowest option was usually for such a small amount that not only was no portion of the loan's principal balance paid, the previous month's interest wasn't covered and the loan balance increased. This phenomenon is known as negative amortization.

With negative amortization along with a low initial down payment, a likely second mortgage and declining home prices, the major players in this area of specialty mortgage lending either failed or sold themselves for a cut-rate price before failing.

Because of myriad accounting problems, BankUnited Financial had not filed a 1-Q or 10-K since October, when they filed an amended report for the quarter ended March 31, 2008. As of that quarter, option-ARMs represented 59% of BankUnited's total loans, or $7.4 billion.

Countrywide Bank FSB avoided failure when its parent, Countrywide Financial, was acquired by Bank of America ( BAC) in July 2008.

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