Regulators Ease Lending-Limit Rule for Healthy S

Savings and loan regulators on Monday temporarily eased restrictions imposed by last year’s bailout bill on thrift institution lending.

As expected, the Office of Thrift Supervision said it would give healthy thrift institutions until the end of 1991 to meet stricter limits on the amount of money S&Ls; may lend to one borrower.

The exemption applies only to loans for residential projects, not commercial development. Also, only the roughly 1,100 thrifts--of 2,500--that meet strict new capital requirements effective in 1995 are eligible.

Aiming at high-flying S&Ls; that risked all of their capital on one loan, last year’s law said thrifts could lend no more than 15% of their capital to a single borrower.

However, home builders used to borrowing from one thrift complained to Congress and the Bush Administration that they were having trouble getting loans for sound projects.

The National Assn. of Home Builders and other trade groups launched a lobbying campaign to get the standard temporarily eased.

The transition rule will permit healthy thrifts to lend 60% of their capital to one borrower until the end of this year, when the limit drops to 30%. Beginning in 1992, the limit returns to the 15% required by the law.

A month ago, an agency official, speaking on condition of anonymity, said the thrift office had submitted a draft of its new lending rule to the Treasury Department.

Thrift Office Director Timothy Ryan, in a statement, said he supports the intent of the original restriction--to prevent institutions from risking everything on one or two projects.

But he said he “believes the transition rule will give the best-capitalized thrifts time to adjust to the new requirement in a carefully prescribed and prudent manner.”

The loan-to-one-borrower rule is one element of a reported credit crunch affecting borrowers, particularly for real estate acquisition, development and construction.

Commercial banks, who have operated under a 15%-of-capital limit all along, had opposed easing the rule. However, Kenneth Guenther, executive vice president of the Independent Bankers Assn. of America, said his group was softening its stance in recognition that last year’s thrift reforms, taken all together, may be too onerous.

“I think (thrift regulators) are trying to keep the healthy healthy, and I think they’re also reacting in part to the real estate lending crunch that is sweeping across this country and has people very, very worried,” he said.

Separately Monday, the Commerce Department said construction spending slumped 0.4% in May, the second consecutive decline.