The countdown began Tuesday for Florida-based BankUnited FSB, which received a prompt corrective action directive from the Office of Thrift Supervision (OTS). The bottom line: Merge with or be acquired by another financial institution within 20 days. OTS said in the directive it considered the Coral Gables bank "under-capitalized" as of January 30 and gave BankUnited 15 days from the date of directive to submit a binding merger or acquisition agreement unless regulators agree to extend the deadline. One of the few major pay option adjustable-rate mortgage (ARM) lenders still standing, BankUnited must achieve and maintain a minimum 8% total risk-based capital ratio, 4% Tier 1 core risk-based capital ratio and 4% leverage ratio within 20 days of the directive. Some $5.89bn in option ARMs accounted for 51% of its loan portfolio at year-end 08, according to a Business Journal analysis of bank data. ARMs by nature indicate increasing future monthly payments for borrowers as rates adjust, which may lead to a higher occurrence of default if borrowers cannot refinance. A high portfolio presence of ARMs and ARM-related defaults, therefore, may necessitate higher loss reserve ratios among lenders. BankUnited in September received an OTS notice where its regulatory capital status changed from well-capitalized to adequately capitalized, effectively restricting its acceptance of brokered deposits. In an August Securities and Exchange Commission filing, the bank said the OTS had "certain concerns" about the bank, including capital adequacy. BankUnited "agreed to maintain capital ratios substantially in excess of the minimum required ratios to be deemed well-capitalized upon raising the agreed upon amount of capital" -- it seemed advisable at the time, as pay-option ARMs accounted for more than 68% of the bank’s entire $10.4bn residential mortgage portfolio at the end of Q208. A spokesperson from BankUnited did not return calls seeking comment before this story went to press. Parent company BankUnited Financial Corp. (BKUNA) shares were trading at 31 cents, down 19.34% in late-afternoon trading. Read the OTS directive. Write to Diana Golobay at diana.golobay@housingwire.com. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments.