The Maryland government agency overseeing Old Court Savings & Loan has reached an agreement with another Baltimore savings association to pay off more than $70 million of Old Court's debt and further assist the liquidation of the defunct thrift's assets, according to a state official.
The agreement between the Maryland Deposit Insurance Fund and the Fairfax Savings Association will provide no immediate relief for thousands of Old Court customers awaiting repayment of their frozen deposits, but it should assist the eventual settlement of Old Court's financial problems, MDIF Director Melville S. Brown said yesterday.
Brown said that under the terms of the agreement reached late Friday, the Fairfax group will pay $70.6 million in cash to obtain residential mortgages and commercial loans made by Old Court. More than $63 million of those loans had been pledged by Old Court as collateral to the Federal Reserve Bank and the thrift's own insurer early last year when it needed cash to feed a so-called silent run on deposits.
The silent runs were a harbinger of the highly public runs at Old Court in May 1985 that followed reports about mismanagement of the giant savings and loan. Old Court's collapse triggered a crisis in the Maryland thrift industry, and MDIF is now attempting to sell the association's far-flung assets to pay off depositors by 1990.
Baltimore Circuit Court Judge Joseph H.H. Kaplan, who is overseeing that liquidation process, is expected to approve the Fairfax-MDIF agreement this week, said Brown.
"This does not mean an instant pay-out to depositors, but every dollar that comes in to the estate eventually helps us with our repayment schedule," Brown said.
Fairfax is to pay $48 million in cash that will go to the federal government for residential first mortgages pledged to the Federal Reserve, $15.6 million to the state for mortgages pledged to the forerunner of MDIF, and another $7 million for a portion of Old Court's commercial loan portfolio, said Brown. MDIF will use the bulk of the money it receives from Fairfax to pay off some of Old Court's previous obligations, as required by the liquidation process.
To obtain the commercial loans, Fairfax also will give MDIF about $22 million in first mortgages on properties owned by the nationwide EPIC real estate syndication firm. EPIC, an arm of the now-defunct Community Savings & Loan, failed last year and touched off a run that later brought down the Bethesda-based thrift association.
Besides giving the Old Court estate an infusion of cash, the agreement with Fairfax will free MDIF from $400,000 a month in interest on those obligations, said Brown.