Firm's woes imperil home sales Consumer First abruptly shuts down

August 02, 1996|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Dozens of home-sale deals across the state threatened to fall apart yesterday, as title agents, borrowers and sellers learned that Columbia-based Consumer First Mortgage Inc. had failed to deliver on some 60 loans and abruptly shut down Wednesday.

The mortgage company's failure to fund loans for houses set to change hands at the end of July set off a panic among title companies handling those property settlements, raising questions about who owned the houses or held the loans.

Some companies -- believing mortgage money had been wired to their accounts -- conducted property transfers, paying off sellers, real estate agents and other expenses, only to find Consumer First had sent no money.

"This kind of thing you pray never happens during your career," said Ed Rybczynski, president of Liberty Title Co. Inc. of White Marsh. "It can put you out of business."

By late yesterday, another lender, MNC Mortgage Corp. had agreed to take over about 60 Consumer First loans and said it expects to disperse funds to title companies within a day.

But the fallout from the incomplete deals and the future of Consumer First, which has seven branches in Maryland and one in Virginia, remained unclear.

Mark Feinberg, Consumer First president, could not be reached yesterday. During an attempt to meet with him in his third-floor offices off Route 108, a reporter was told by attorney Jacqueline Stewart, "We have no comment, and I need to walk you out."

Several employees outside on a break also refused to comment but indicated they knew little about the future of their jobs.

Theodore E. "Chip" Reichhart Jr., president of MNC Mortgage, ++ said Consumer First executives contacted him yesterday morning about taking over some 60 loans for homes purchased throughout the state.

"They had an urgent situation that came to a head this morning," he said. "It looks like most [loans] closed in the last day or two, but they were unable to fund the loans. Essentially, they're out of business."

But state officials who license and regulate mortgage companies said they're unsure whether the company will shut down for good. State regulators will meet with company executives this morning to discuss the company's status.

"Our primary concern is the consumer, to make sure the consumer gets the product and service they had purchased," said H. Robert Hergenroeder, the state's commissioner of financial regulation. "We want to set up a system to assist Maryland customers if necessary, and to know what the plan is if the company does not stay in business."

While visiting Consumer First's Columbia headquarters for a routine examination follow-up yesterday, department examiners ended up looking into title companies' complaints, Hergenroeder said. During the past few years, only minor complaints have been lodged against the 9-year-old company, which is licensed as both mortgage lender and broker, he said. The most recent problems may have stemmed from one of Consumer First's lenders refusing to fund the brokered loans, he said.

Title companies that oversee settlements for Consumer First borrowers found themselves scrambling in the aftermath of Wednesday settlements.

Liberty Title agents had been conducting an after-hours settlement Wednesday with a first-time homebuyer, only to hear rumors afterward that no money would be forthcoming from Consumer First.

But another lender stepped in. The originator of the home loan, First Mariner Bank, which had brokered the loan to Consumer First, agreed the next day to take the loan.

"The loan was funded, and the buyers have their house," he said.

Other buyers and sellers, though, were not so fortunate.

Fountainhead Title Group of Columbia had finished about five settlements when it was discovered that the mortgage money was missing. The title company was forced to stop checks it had cut to pay sellers, real estate agents, mortgages, bills and taxes RTC and put the settlements on hold, said Michael Gisriel, senior vice president.

Pub Date: 8/02/96

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