Banking Rules Are Eased for Quake Victims

Federal regulators on Thursday gave California savings and loan firms expanded latitude and flexibility in helping customers whose homes were damaged in the recent earthquake and its aftershocks that caused at least $137 million in damage in Los Angeles and Orange counties.

The key provision of a regulatory bulletin issued by the Federal Home Loan Bank of San Francisco allows savings and loan customers to avoid penalties for early withdrawal of savings from term accounts if they need the money to repair their homes. The penalty waivers will normally be permitted for six months.

Another provision encourages lenders to restructure interest rate terms on a mortgage if the borrower is having trouble making payments on a home damaged by the tremors. This would be particularly helpful if homeowners have been forced to abandon their homes because of the damage, regulatory officials said.

Lenders Not Penalized

The bulletin was sparked by an order Wednesday from President Reagan that declared Orange and Los Angeles counties disaster areas. Reagan’s directive also allows the Small Business Administration to make low-interest loans for repairs on properties damaged by the quakes.

The action by the San Francisco Home Loan Bank is a common practice during times of federally declared emergencies and has been used repeatedly in years past to help California property owners repair damage caused by floods, fires and earthquakes. Savings and loan firms are the state’s principal lenders for residential property.

The regulatory bulletin also indicated that lenders will not be penalized for helping their customers, even if such aid means allowing customers to temporarily fall behind in their mortgage payments.

When customers fall behind on loan payments, the mortgages are termed delinquent and go into what regulators classify as the “scheduled item” category.

“Where the extension of leniency or forebearance causes a temporary increase in . . . scheduled items, special consideration will be given to this fact” during regulatory examinations, the bank bulletin said. Under other circumstances, a variety of regulatory penalties could be imposed.