BANKING/ FINANCE

Default Warning: A year ago, one of the nation’s top banking regulators jolted California’s banking industry with a warning that the real estate markets in six metropolitan areas in the state, including Orange County, had overheated so much that serious loan defaults loomed.

In the past 12 months, defaults haven’t posed much of a problem, but a survey in this week’s U.S. News and World Report suggests that bankers had still better heed the warning of L. William Seidman, chairman of the Federal Deposit Insurance Corp.

The survey shows that over the last year, home prices have hardly moved in Orange County--known in real estate circles as the Anaheim metropolitan statistical area. The county’s 0.08% increase in the median price of existing homes ranks it third on the list of residential real estate markets that have gone cold. Los Angeles and Riverside follow in fourth and fifth places, respectively, with identical 1.1% increases.

The slow market impacts builders and developers who have huge interest costs to pay to lenders like banks while trying to sell properties. They say that the market began to revive in March, though economists see continued problems.

Last year, Seidman said bankers should be cautious about lending in those six state metropolitan areas, as well as 36 other areas nationwide, because the growth in jobs was diminishing and because most people simply couldn’t afford to pay for a home in those areas, which included Los Angeles, San Diego, San Francisco, Sacramento and San Jose.

State banking regulators and industry leaders quickly pooh-poohed Seidman’s concerns and pointed out that California was still growing and that the expanding economy could handle the problems.