Bankers Tie a Yellow Ribbon Round GI Mortgages : Finance: Tiny Dana Niguel Bank is offering military families deferments on principal and interest payments on existing consumer loans, as well as free checking in existing accounts.

A few county bankers are going beyond the call of duty to ease the financial burdens borne by active reservists and other members of the armed forces called to duty as a result of the crisis in the Middle East.

The Soldiers and Sailors Civil Relief Act requires lenders to limit interest rates to 6% on mortgage and consumer loans to reservists called to active duty. The law also generally prohibits lenders from foreclosing on military personnel who are on combat status.

While most county-based lenders say they have not yet established formal programs, most say they would be willing to deal individually with customers who ask special consideration.

But tiny Dana Niguel Bank, an 8-year-old community bank with two offices and $70 million in assets, has decided to do even more.

“Because of our location between El Toro and Camp Pendleton, we set something up in advance, as soon as the decision was made to send troops to the Middle East,” said Thomas Herndon, president and chief executive.

Other institutions expect little impact from the call-up of reserves.

“We just don’t have that many consumer loans,” said Stanley Pawlowski, chairman of El Camino Bank in Anaheim. “And no one has asked us for assistance yet. But we would definitely work with any customer who requested a loan extension or payment relief or suspension of interest because of a military hardship.”

Herndon said Dana Niguel has decided to go far beyond what the the law requires. The bank is offering military families deferments on principal and interest payments on existing consumer loans, as well as free checking in existing accounts.

Also, Herndon said, “we are looking at making some new loans for hardship cases, in which we would significantly reduce the interest rate and even defer payments until things return to normal.”

At the bank’s board meeting next month, Herndon said, he will propose that the bank offer a debt consolidation loan for military personnel returning from active duty.

“Basically, we want to go out of the way to help people with situations that aren’t covered in the soldiers and sailors act,” he said.

Savings and loans are the major consumer lenders among local financial institutions, but many thrifts are so sick that they have been taken over by the government. That prevents them from making individual policy decisions about treatment of military personnel.

A spokesman for Mercury Savings & Loan in Huntington Beach, one of the county’s larger thrifts now operating under government control, referred questions about military loan policies to the federal Resolution Trust Corp. regional office in Denver.

An RTC spokesman said that institutions under government control must adhere to the terms of the federal law and that their ability to institute programs that go beyond the law’s minimum requirements is being discussed.

FarWest Savings in Newport Beach, a large thrift not under government control, has no formal program, said William Fowler, senior vice president for retail banking.

“The big institutions can do a lot for the service personnel, especially in moving money overseas,” he said. “We are real small compared to a Wells Fargo Bank. But we would handle requests for relief on a case-by-case basis. I can’t see us having any problems accommodating someone called up for military service.”

Among the big banks, both Wells Fargo and First Interstate have said they will defer principal and interest payments for reservists called to active duty.

First Interstate Bank of California has begun a similar effort. And Society Bank of Cleveland has established a toll-free telephone number to provide information and answer questions about the law.

American Banker, an industry newspaper, reported Tuesday that the soldiers and sailors law could be troublesome for banks because it does not require the federal government to reimburse them.

But the paper reported that the Defense Department’s general counsel has warned some lenders not to resist efforts by eligible servicemen to arrange interest rate cuts to the 6% maximum specified in the law.

With the President planning to activate up to 50,000 members of the National Guard and other reserves, just a small percentage of most institutions’ customer bases are expected to be affected, he said.

Wells Fargo, for instance, anticipates that only about 400 of its customers will be called to active duty and be eligible to take advantage of its payment deferral plan.

In Orange County, an informal survey of several dozen banks, S&Ls; and thrift and loan associations failed to turn up a single instance of a customer requesting relief.

Times staff writer Anne Michaud contributed to this report.