Banking on California

There’s almost nothing a banker hates more than being saddled with a foreclosed house--having to get the lawn mowed, the windows washed, the property sold. It’s even worse if the house is seriously damaged, as so many were in the Northridge quake.

Not surprisingly, some homeowners have eyed cracked foundations and walls and decided that walking away is the smart move, because their mortgages are greater than the depressed worth of their houses.

Federal agencies are now turning to this and other long-term recovery problems. Officials of the Department of Housing and Urban Development and the Small Business Administration were in town last week, working with Mayor Richard Riordan and local, state and federal officials to streamline loan procedures, snip red tape and encourage so-called “character loans” that lie outside traditional lending guidelines.

The government is also looking to the private sector for solutions. Enter the nation’s largest savings and loan, Irwindale-based Home Savings of America, which is offering some of its own mortgage holders without equity in their homes a smorgasbord of assistance, including about 200 repair loans on which no payments are required until the homes are sold. At that time an owner will split any profit 50-50 with Home Savings, up to the loan amount. Yes, it’s a gamble for the S&L;, but it is likely to stave off larger losses. It’s also an admirable bet on Southern California’s future.

“Our aim is to keep people in their homes,” says Home Savings Chairman Charles R. Rinehart. “This is good for the stability of the community and ultimately good for us.”