Consumer First offices taken over Va. bank's mortgage unit gets 4 branches of shut-down lender

375 loans assumed

Columbia, Timonium, Bel Air, Frederick sites are part of deal

August 06, 1996|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

The mortgage division of a Virginia-based savings bank took over four branches of the defunct Columbia-based Consumer First Mortgage Inc., which abruptly shut down last week with more than 600 home loans in the pipeline.

Branches in Columbia, Timonium, Bel Air and Frederick -- along with their employees and home loan business -- became part of Virginia First Mortgage yesterday in a deal arranged over the weekend by the two lenders' officers, said Gary Martin, chief executive officer of Virginia First.

For Virginia First, a division of Virginia First Savings Bank, the Columbia lender's demise meant a chance to push farther into the Maryland market. The Petersburg, Va.-based lender, with seven branches in that state, had just one Maryland office, in Rockville.

"We view this as an opportunity to take over four existing branches that were producing good loans," said Martin, who said the company will assume an estimated 375 loans worth from $40 million to $45 million. Consumer First "will assign them to Virginia First and we will close those loans."

Borrowers will likely keep originally promised mortgage rates -- or in some cases get a lower rate because mortgage rates have dropped in the past few days, Martin said.

State financial regulators have been investigating Consumer First since complaints surfaced last week. Last Wednesday, in home-sale settlements across the state, borrowers, sellers, title agents and real estate agents found themselves without mortgages when Consumer First failed to deliver on loans for dozens of houses set to change ownership by the end of July.

By yesterday, the state had determined the lender had shut down with 648 pending loans in Maryland worth $107 million, said H. Robert Hergenroeder, the Maryland commissioner of financial regulation. The state plans to monitor the defunct company to ensure all loans are assigned to other lenders and that consumers recoup any losses in fees tied to the mortgage, Hergenroeder said. Consumer First had seven Maryland branches and also made and brokered mortgages in Virginia, Pennsylvania, Delaware and New Jersey.

Besides Virginia First, other lenders are considering stepping in, taking over Consumer First branches and business in Millersville and Sykesville, the bank commissioner said. To his knowledge, he said, no lender has yet expressed interest in the Ocean City branch. MNC Mortgage Corp. had agreed last week to take over approximately 60 Consumer First loans.

Virginia First will hire an estimated 100 employees at the four branch offices, along with their managers. But Virginia First has no plans to bring Consumer First headquarters management -- including President Mark Feinberg -- into its system, Martin said.

Feinberg, who started Consumer First nine years ago, has not returned repeated phone calls.

The company ran out of money to fund loans Wednesday when its line of credit at a bank was abruptly cut off, several sources said.

One former branch manager and vice president, who will head a new branch for Virginia First, said he had no inkling Consumer First had financial troubles until Feinberg phoned him Wednesday morning saying credit had been cut off and that "as of tomorrow, we'll no longer exist," Phil Welzenbach said. "This came as a shock and was devastating to all of us."

After the uncertainty of the past few days, with some employees choosing to work without pay, Welzenbach said he looks forward to making loans for Virginia First.

"One of the things we never had was an affiliation with a bank," he said. "What we have now is a strong, federally chartered bank we've become part of, and the recognition of being backed by a bank. The acquisition is good for them and will be good for us."

Pub Date: 8/06/96

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