Sep. 13--Scores of banks from Maryland to Nevada and their regulators are scrambling to deal with loans that banks had purchased from an ailing affiliate of Overland Park-based Brooke Corp.

Several banks have stepped between Aleritas Capital Corp., formerly called Brooke Credit Corp., and the borrowers to ensure payments flow to the banks instead of the troubled Aleritas.

Aleritas had made loans primarily to insurance franchisees of Brooke Corp. and then sold stakes in those loans to the banks.

One Kansas bank received a restraining order after telling a court that a borrower's September payment collected by Aleritas had not been distributed to the banks.

"That money is gone," said Grant Glenn, an attorney who represented Kendall State Bank in Valley Falls, Kan.

Separately, state and federal banking regulators held a meeting recently to discuss the deteriorating situation.

Kansas Bank Commissioner Tom Thull said he is inquiring as to which banks bought participations in the loans, given concerns about the condition of the loans.

"We are assembling all the resources to evaluate that," Thull said.

A Nebraska banking official also attended the meeting, and a spokeswoman for the department said it is monitoring the situation.

Officials of Aleritas could not be reached for comment.

Aleritas, Brooke Corp. and others in the group were sued earlier this week by a New York bank over a payment dispute. The Bank of New York Mellon, alleging the money was diverted to accounts that Brooke officials controlled, has asked the court to appoint a receiver in the case.

One Brooke official expressed outrage at the New York bank's claims, disputed them and countered that the bank had turned a contractual dispute into "something personal."

The loans that Aleritas made largely financed insurance businesses, about half of which were franchisees of Brooke Capital Corp., which is another Brooke Corp. affiliate, according to Aleritas' recent filings with the Securities and Exchange Commission. It also said many of the loans involved businesses in Florida.

Its reports also said borrowers have had financial difficulties because of the "slow" insurance market and have become delinquent on some loans.

Aleritas itself has sharply curtailed its activities because of its financial difficulties.

Aleritas filings describe "a network of over 175 banks and financial institutions" that have bought loans and securities backed by loans.