HomeFed’s Rating Downgraded; $110 Million in Debt Affected : Finance: The move is a reaction to concerns about real estate and nonperforming loans.

Moody’s Investors Service on Tuesday downgraded HomeFed Bank’s subordinated debt and deposit ratings, a move that affected about $110 million of long-term debt.

Moody’s linked the rating downgradings to an increase in foreclosed commercial real estate and nonperforming loans.

“We’re disappointed by the downgrade,” HomeFed spokeswoman Kaye Rowan said Tuesday. “But we understand that the purpose of these (ratings) agencies is to be conservative.”

Moody’s expects that HomeFed, like most of California’s major financial institutions, will experience further deterioration in the quality of its real estate loans.

Any additional deterioration could force the S&L; to take additional reserves, a move that would further reduce the S&L;’s profitability, according to Moody’s.

Moody’s downgraded HomeFed’s ratings for long-term deposits to B-1 from BA-2. Moody’s downgraded the thrift’s rating for subordinated debt to CAA from B-1.

Moody’s, which on Tuesday also downgraded debt and deposit ratings for Coast Federal Bank, recently had downgraded ratings for several other large California financial institutions.

Stock in HomeFed Corp., the parent company of HomeFed Bank, closed up $.25 at $6.625 on Tuesday.

The S&L;’s stock has drifted up in recent days following word that a group led by Idanta Partners, a La Jolla investment group, had acquired 7.2% of HomeFed Corp.’s shares. HomeFed had traded at $5 or less immediately before the Idanta group’s investment became public.

Idanta founder and general partner David J. Dunn has described his group’s investment in HomeFed as a “long-term” venture.

Dunn, in a recent interview, said he does not foresee an immediate turnaround in California’s sluggish real estate market.