Atlantic Residential launches loan programKeith Stackhouse and...

Atlantic Residential launches loan program

Keith Stackhouse and Fred Alt last worked together at the Federal Home Loan Mortgage Corp. in the 1980s. So they know a thing or two about mortgages.


Now Mr. Stackhouse, president of Baltimore Bancorp's Atlantic Residential Mortgage Corp. (ARMCO) subsidiary, and Senior Vice President Mr. Alt are expanding ARMCO's charter with a new program: lending to companies that want to buy mortgage servicing rights.

Mortgage companies can originate their own home loans, then sell them to a third party and retain the right to service them. Or they can buy servicing rights from the mortgages' owners, without originating or buying the loans.


Of course, one major risk is that as interest rates fall, homeowners may refinance and prepay their mortgages, which would make the servicing rights worthless. That's partly what led to last year's federal takeover of Standard Federal Savings Bank in Gaithersburg. And that would be bad news for the bank that lent money to buy those rights.

Mr. Alt believes the company's risk will be limited. Interest rates have fallen pretty far already, and are unlikely to drop much further, he says. The loans he plans to make will require accelerated payments if nationwide mortgage prepayment levels pick up. And he believes experience will separate the amateurs from the pros.

"The recent prepayment experience does scare some of the people," Mr. Alt says. "We think it's a terrific time to get into the market." ARMCO hopes to make $40 million in loans next year.

Internet aims to get you MOST for your dollar

The ads promise "free money." Sure, and I've got some swampland I'd like to interest you in.

But wait -- Internet Inc., which runs the MOST ATM network, seems to be serious about this. The Reston, Va., company last week started a promotion aimed at increasing use of its automated teller machines, with free money as the come-on.

In newspaper ads, Internet is providing coupons for a variety of retailers, including gas stations and supermarkets. The coupons entitle users to $1 or $2 off purchases made with MOST cards.

The goal is to encourage consumers to see "the benefits and advantages of using their ATM card as another form of payment," says David A. O'Connor, president and chief executive of Internet (not to be confused with the computer network of the same name).


There are 28,000 MOST point-of-service terminals in the Mid-Atlantic and South, and an estimated 12 million transactions will be completed this year. But Internet's surveys show that only 20 percent of Baltimore-area MOST cardholders use their cards for retail purchases.

Some limits apply in this promotion, including only one coupon per store visit. And beware, your bank may charge a transaction fee.

The deal ends Oct. 31.

Ellicott City bank seeks to set up affiliate

What's good for MNC Financial Inc. and its South Charles Realty Inc. is good for Commercial & Farmers Bank, says John S. Whiteside.

Mr. Whiteside, president of the small Ellicott City bank, has applied to the state bank commissioner for permission to set up Rogers Avenue Realty Inc. as an affiliate to deal with the bank's foreclosed real estate.


"The larger banks have been doing this for some time, and now you're seeing the community banks do the same," said Mr. Whiteside. C&F; has $120 million in assets.

C&F;'s real estate problems, which total about $1.2 million, are minor. But the law gives some tax and other benefits to banks that establish such real estate subsidiaries -- or "bad banks," as Mr. Whiteside notes.

C&F;'s real estate problems are different from the likes of MNC, which lent directly to real estate developers. Those banks were the first to take a dive as the recession started.

C&F;'s clients, by contrast, are smaller businesses who have been hanging on as best they can through the slow recovery. Some have surrendered, defaulting on loans secured by their buildings, and now C&F; finds itself in the real estate business.

"We've seen the worst part of it," Mr. Whiteside assures. Despite the application to establish Rogers Avenue Realty, "We're hoping there won't be a lot of activity in there."

GEICO will severties with AVEMCO


GEICO Corp. this week is expected to almost completely sever its long relationship with AVEMCO Corp., the Frederick specialty insurer. The Washington company last week sold 3.25 million of the 3.89 million shares, or 34 percent, it owned of AVEMCO.

Another 40,000 shares will be sold by the end of this week, and GEICO said in an SEC filing that it plans to sell the remaining 600,000 shares over time.

AVEMCO bought back more than two-thirds of the shares GEICO sold. The rest were bought by two institutional investors, and the company's officers, directors and a profit-sharing plan.

GEICO also has relinquished its two seats on AVEMCO's board. "I think GEICO over the past couple of years has been focusing a lot of its activities on its core business," said John R. Yuska, AVEMCO's chief financial officer.

He said the deal increases the Frederick company's debt burden a bit, but lightens its equity load. AVEMCO's stock closed at $18.75 yesterday, up 50 cents on the day, and almost $2 higher than its mid-August low.