Banks Offer to Defer Payment for Reservists : Finance: Glendale Federal decision on loan payments follows action by Wells Fargo and First Interstate--moves an industry expert calls ‘really extraordinary.’
As a commander in the Navy Reserve called into active duty last weekend, John Greif’s salary will be less than a third of what he makes as a surgeon for Kaiser Permanente.
“Personally, it is going to be a tremendous financial hardship,” said Greif, who has been assigned for three months to a military hospital in South Carolina.
One of the La Jolla surgeon’s primary financial concerns when he learned he had been called up to active duty was how he was going to make payments on his loans, which include $4,000-plus a month for his mortgage.
So Greif was understandably relieved when one of his lenders, Glendale Federal Bank, announced Monday that it would defer payments on all real estate and consumer loans held by military reservists called into active duty.
Glendale Federal’s action, which is above and beyond what federal law requires lenders to do for activated reservists, followed similar steps announced late last week by Wells Fargo and First Interstate banks. But Glendale Federal executives say the announcement was not a copycat gesture.
“We actually were planning this last week,” spokesman Carol Kramer said Monday. Wells Fargo “just beat us to the punch.”
Like Glendale Federal, Wells Fargo and First Interstate have said they will allow activated reservists to defer principal and interest payments on all consumer loans. The deferrals will remain in effect for the duration of the reservists’ active-duty assignments and will cover only debts incurred before activation.
The Soldiers’ and Sailors’ Civil Relief Act of 1940 requires banks only to limit interest payments to 6% if reservists can show that their activation will cause serious financial hardship. Employers are not required by federal law to compensate reservists for any loss of income their activation might cause.
Ken Preston, a vice president at First Interstate, said the purpose of his bank’s action is to support their reservist customers who have been called up by President Bush.
“It’s our intent to support them while they’re there,” Preston said. “It makes life a little bit easier for them, less worries.”
Such a move also has image value for the bank, Preston acknowledged. “But what can you say about that? No, it doesn’t look bad (for the bank). It does look good,” he said.
Wells Fargo promoted its policy in advertisements addressed to “reservists and their families” in 15 California newspapers Monday. But Wells Fargo officials have insisted that their only motive is civic goodwill and customer service.
“It’s a show of support. It’s patriotic,” said Lorna Doubet, spokeswoman for Wells Fargo.
Officials from all three banks say they do not know specifically how many of their customers will be affected by the call-up. But they also say they are confident the number is fairly small. Therefore, the loss of revenue caused by the waived or reduced interest payments will not much affect the institutions’ bottom line.
Larry Kurmel, executive director of the California Bankers Assn. in San Francisco, said other California banks may follow the examples set by Wells Fargo, Glendale and First Interstate. However, most banks will not do much more for reservists than required by law, he said.
“For (a financial) institution to come out and go that extra mile is really extraordinary,” Kurmel said. “It’s expensive to do that. . . . There’s just an awful lot of logistics involved.”
“Most banks are going to look at their (reservist) borrowers on an individual basis,” he said. “The numbers we’re talking about may not be that awesome. . . . It’s a real individual situation, and it’s the kind of thing that is best dealt with one-on-one.”
Meanwhile, Greif and his wife, Kate, a former accountant, have been looking for ways to cut back on their expenses for the duration of his three-month activation.
Earlier this month, Kate Greif said, she and her husband had considered selling their house to buy a bigger one. Now their plans will have to wait.
“A couple of months ago, we were optimistic and foolish,” she said. “It’s ironic that way.”
Times staff writer Nora Zamichow contributed to this article.