William Ratliff 3d is carrying around a lot of company history.

He is the third Ratliff to head Collateral Mortgage Ltd. of Birmingham, Ala.

Founded by his grandfather in 1933 and still wholly owned by the Ratliff family, Collateral has grown into much more than a mortgage bank.

The core home-loan business is backed up by a $600 million-asset federal savings bank and three insurance companies, not the least of which is Triad Guaranty Insurance Corp., a private mortgage insurance company that has a 1.2% national market share.

Mortgage insurers guarantee payment of a portion of a loan for borrowers who make down payments smaller than 20%.

Triad "is not huge, but at least it's on the radar screen," Mr. Ratliff said.

To his credit, the same could be said of the whole Collateral empire.

Collateral originated just over $1 billion in home loans in 1992 and currently services close to $3 billion. It is, in short, a quintessential midsize mortgage bank.

As such, it is the sort of company that mortgage experts say is doomed to falter and become vulnerable to takeover proposals when the refinancing boom wanes.

Protecting the Company

Since 1986, when he was made president and individual general partner, Mr. Ratliff has done everything he could to protect his company and his family money from the industry consolidation that he himself expects.

With mortgage applications running at record levels as interest rates continue to plunge, the end of the boom is not yet in sight, so Collateral appears to have time to build its defenses.

The key to his strategy has been diversification within the world of mortgage finance - and even a bit outside of that world.

"One of the driving forces behind our diversification has been our analysis of the residential mortgage banking business, " said Mr. Ratliff in a recent telephone interview. The margins are under pressure, and that will continue to be the case."

But equally important to the company's survival, Mr. Ratliff says, is for it to stay close to its business roots and not get too large. "We have been in the mortgage banking business a long time, and we don't expect to be driven out of it."

Unlike just about every other mortgage company in America, he does not want a huge servicing portfolio. Others.look at servicing as a long-term source of reliable earnings. But he says the value of servicing is too dependent on government policy for a family business to "put all its eggs in one basket."

After all, he says, "Any money we lose is all our own."

Money-Maker

In 1990, in recognition of the insurance ventures' success, Mr. Ratliff created Collateral Investment Corp. as the parent of the company's three insurance entities. The mortgage insurance company, in particular, has been a significant money maker.

"It has been the fastest growing and in many ways the most successful part of our overall business operation," Mr. Ratliff said.

Collateral has also taken advantage of its ownership of New South Federal Savings Bank by making car and second-mortgage loans.

But aside from diversification, Mr. Ratliff is confident that Collateral's discipline and ability to be a low-cost originator will bolster its chances for survival in an environment of rising interest rates.

"Collateral has a way of making money and thriving through all types of markets," says Fred B. Koons who worked for Collateral for seven years in the 1960s and 1970s.

Mr. Koons, now CEO of Chase Home Mortgage Corp. in Tampa, Fla., has confidence that Collateral will survive.

"They are the ultimate opportunists. They will prosper during whatever comes."

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