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Levine buys back Arcs Mortgage division from Bank of New York

Los Angeles Business Journal, August 21, 1995 by Liz Mullen

Levine announced last week that he was buying the multi-family division of Arcs from its parent company, Bank of New York Co. Inc., for an undisclosed price.

Bank of New York has been in the process of liquidating Calabasas-based mortgage banking company Arcs since the beginning of 1994.

Levine officially resigned as president and chief executive officer of Arcs on Aug. 1, he said.

Currently, there are about 75 employees of Arcs still working at the Calabasas headquarters, down from about 275 earlier this year, he said. Those 75 will leave the company by the end of August, Levine said.

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In July, Arcs sold most of its business, a $7.8 billion residential mortgage servicing portfolio, to the mortgage banking division of Chase Manhattan Bank, he noted.

Levine and prominent California real estate investors Marshall Ezralow and Gary Leff this month bought another, separate loan portfolio - $1 billion of Arcs' multi-family loans for an undisclosed price.

Making a new start

Levine intends to use the portfolio to launch a new business from Arcs old Calabasas headquarters.

The new company will be called Arcs Commercial Mortgage Inc. and will be in the niche business of making loans on large apartment complexes of 35 units or more, Levine said.

"We believe the market is very strong for apartment house lending," Levine said. "Last year we originated about $250 million in apartment loans and this year we expect a similar rate of production."

Levine said he intends to keep about 35 employees from the old Arcs Mortgage Inc. to run the new commercial mortgage banking company.

Levine founded Arcs in 1971 "with $105,000 of mostly borrowed capital," he said. Almost immediately after he founded it, he sold it to upstate New York-based Empire National Bank.

Levine said he sold it because it "was growing more rapidly than I anticipated and the credit needs were significant and I thought having a bank as a parent would provide us with significant temporary funds for loans."

Empire National Bank was acquired by the Bank of New York in 1980, Levine said. "I really only owned Arcs from January of 1971 to October of 1971," he said.

Riding the wave

Arcs, like a lot of mortgage banking companies, enjoyed major growth during the refinancing boom of the early 1990s.

Mortgage banking companies, unlike banks, do not keep the loans they originate, but sell them into the secondary mortgage market to agencies such as the Federal National Mortgage Association.

At its peak, during the refinancing boom of 1993, Arcs had 967 employees in 42 branches in 12 different states.

But then the refinance market crashed in 1994 when interest rates went up. And Bank of New York officials decided to get out of that business, Levine said.

He said that there are no hard feelings over Bank of New York's decision to close Arcs.

Bank of New York "is a class act," he said, noting that the company allowed him to keep the Arcs name even though he did not buy the whole company.

"This is the first time, really, that I'm my own boss," Levine said. "And you might say I have no interest in selling (Arcs) again to a large company," he said.

This time around, he said, "I'd rather be an entrepreneur."

Business Services Industry

Levine buys back Arcs Mortgage division from Bank of New York

Los Angeles Business Journal, August 21, 1995 by Liz Mullen

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