Great Western gearing up for possible lending spurt

In the latest sign that construction lending activities of healthy thrifts may increase, a Great Western Bank executive last week told the Business Journal that the institution will likely expand its residential real estate construction lending activities next year.

"Our perspective is that there is going to be a housing shortage in California," said Sam Lyons, senior vice president of mortgage banking at Beverly Hills-based Great Western, the second largest savings and loan in the nation. "We will be a player in that market. We are dusting off our procedures and plans and are revamping them to reflect today's environment."

Great Western had $107 million in construction loans on its books at Dec. 31, 1990, down from $557 million at Dec. 31, 1988, according to information from Sheshunoff Information Services of Austin, Texas.

While emphasizing that no definite program is in place, Lyons said the bank expects to be "geared up" to begin such activities by the end of the year. "We will be conservative, I can tell you that," he said.

Lyons said he thinks other healthy S&L institutions will follow suit.

"I know from experience that we all come up with these brilliant ideas at about the same time," he said.

Lyons' statement comes amid comments by Office of Thrift Supervision officials that the regulatory agency is looking for ways to make it easier for institutions to become more involved in residential construction lending.

"We are actively considering ways that we can get you back into that business, (but) not in a fashion that will generate a lot of losses," OTS Deputy Director Jonathan Fiechter told attendees of the California League of Savings Institutions' annual convention in Coronado held Sept. 26. "You don't want that and we don't want that. Nor do we want to limit lending to developers who have sufficient collateral guarantees, etc., so the risk to you is similar to that of a Treasury bill. That's not our intent either."

A representative of the local building industry, stung by lenders' refusals to provide loan extensions to builders whose original construction loans are coming due, expressed skepticism.