The lawsuit alleged the banks and Residential Funding Crop., a former subsidiary of General Motors Acceptance Corp., conspired to mislead borrowers about loan costs, interest rates and the loan's actual value.

If the pending class action suit settles, Guaranty National Bank shareholders may recover more than $11 million.

"A settlement this size does not happen all that often," said a spokesman for the Federal Deposit Insurance Corp., which took over Guaranty National on March 13, 2004, minutes after the bank was closed by the federal office of the Comptroller of the Currency.

OCC officials claim that at the time, Guaranty National was closed for mismanagement and bad banking practices. Specifically, they cited "substantial violations of law and a substantial shrinking of assets and earnings due to unsafe and unsound practices."

The alleged violations "weakened the bank's condition and seriously prejudiced the interests of the bank's depositors and the deposit insurance fund."

Federal officials said the bank "was poorly managed and lacked a permanent president and senior lending officer and appropriate strategic direction at the time of its closing."

David Barr, a spokesman for the FDIC, said the bulk of the money the FDIC has accumulated comes from loans Hancock chose not to assume that either have been sold or are still being paid off by borrowers.

The lawsuit is open to people who borrowed from Guaranty by taking part in a second-mortgage program handled by Guaranty National and Commonwealth Bank of Northern Virginia.