The Los Angeles Times from Los Angeles, California • 57

floe Angeles Slimes CCtPart IV riday, October 16, 1981 Rules Liberalized on Balloon Mortgages; Reaction Is Mixed By DORIS A. BYRON, Times Staff Writer Photo shows Buffums's Long Beach store, administrative offices as they appeared in 1928. Buffums' Building in L.B. Is Sold Federal regulators liberalized the rules for balloon-payment mortgages Thursday, giving federally chartered savings and loans the ability to lend up to 95 of a home's value for a period of up to 40 years, with all or part of the loan due at the end of that time. Although a sampling of federal executives indicated no interest in a loan that would not be repaid for 40 years, they generally cheered the action as a positive step toward the deregulation that much of the industry is clamoring for.

Some also said it could help would-be homebuyers by reducing the amount of down payment needed for a balloon mortgage to 5 of the home's purchase price. Previous rules required 40. (With a balloon-payment mortgage, the borrower pays interest but little or none of his loan balance during the life of the loan. Because of that, his monthly payments are lower than with a traditional loan in which principal and interest are paid monthly. However, that means he must repay the entire loan in a "balloon" payment when the term of the loan ends.) 'Provides Flexibility' "I think it's beautiful," said Richard Christopher, senior vice president for investment operations at Home Federal Savings Loan San Diego, which has been in the forefront in offering non-traditional mortgages.

"It goes to the heart of the thrust for deregulation. It provides greater flexibility, and it's available." The new regulations approved by the Federal Home Loan Bank Board, which regulates the nation's estimated 2,000 federal increase the number of years over which a mortgage may be amortized (for the purpose of calculating monthly payments) by 10 years, from the previous limit of 30. The mortgage balloon may be due and payable in up to 40 years, rather than in five years, as the old rules stipulate. The new rules go into effect Oct. 21.

A spokesman for the San Francisco Federal Home Loan Bank said the precise terms of a balloon-payment mortgage such as whether the monthly payments would fluctuate with interest rates or be fixed for the life of the loan would be left to the lenders. Anthony Frank, president of Citizens Savings Loan Assn. in San Francisco, was among those who welcomed the bank board decision. Frank foresaw the rules being used to create mortgages with fixed monthly payments for an intermediate-length term, perhaps 10 years, and with relatively little amortization. He said developing such an instrument is important if the home mortgage community is going to market its loans to pension funds, which are expected to spend billions of dollars in real estate transactions in the 1980s.

"I think that's the significance," Frank said. "We're seeing the emergence of a new instrument that will have investment community acceptance and offer the borrower some certainty about his monthly payments." Christopher of Home Federal said his institution would welcome the opportunity to make balloon mortgages for 90 of a home's price which would be due in two years, for example. The has been making about $3 million to $4 million a month in balloon mortgage loans under the old rules. However, an executive at California Federal Savings Loan Los Angeles, was considerably less enthusiastic. David J.

Reed, executive vice president for lending operations, noted that the previous rules on balloon-payment mortgages were enacted during the Depression when many people lost their homes because they were unable to refinance the loans. The fully amortized home loan, generally over a 30-year period, became standard as a result of the experience of that era, he said. Acceptance Questioned He questioned how well consumers may accept the new loans. "From the consumer point of view, what's going to happen if mortgage funds are unavailable when the debt comes due?" Reed queried rhetorically. From the lender's point of view, he voiced concerns that an attempt to "call" the loans when the balloon was due could prove futile if there were widespread protests.

Reed said California Federal offers no balloon-payment residential mortgages. "I would prefer to have an adjustable mortgage loan that protects the lender as well as the consumer," he said. "As a consumer, I'd be afraid of waking up every day one day closer to a call on my loan." By ROBERT J. GORE, Times Staff Writer A Southern California retailing landmark for nearly 70 years, the Buffums' department store building in downtown Long Beach, has been sold to a Woodland Hills investor group. William Bloodgood, managing partner of the group of four investors, said plans for the six-story downtown structure have not yet been determined, but he expects them to be set in about three months.

"We are bullish about Long Beach," Bloodgood said. Alternatives being examined included continued retail use or converting some or all of the building into offices, he said. The Buffums' store as well as the administrative offices of the 15-store chain will move to the new Long Beach Plaza when that mall is completed in April, 1982. Neither Buffums' officials nor Bloodgood would discuss details of the purchase or reveal the names of two of the four investors. The other managing partner is John Long, owner of Long Asset Management Co.

of Los Angeles, Bloodgood said. Records on file with the Los Angeles County Recorder show that the building is owned by Bloodgood, Long and L.A.M.-Broadway Associates. Long, Steven A. Berlinger and Eugene S. Rosenfeld are listed in the documents as partners in L.A.M.-Broadway Associates.

A promissory note was listed as securing the purchase on the corporate grant deed on file. According to the documents, escrow closed on the transaction in early September, but no announcement was made at the time. Stocks Post Modest Rally; Dow Gains 5 Blue-Chip, Glamour Issues Lead Advance; Interest Fears Lessen From Times Wire Services NEW YORK-The stock market staged a modest rally Thursday, with many of the blue-chip and glamour issues that were sold off Wednesday leading the recovery. The Dow Jones average of 30 industrials, off 14.93 points in the previous session, rebounded 5.61 to 856.26. The daily tally on the New York Stock Exchange showed about eight issues advancing in price for every seven that lost ground, and the exchange's composite index rose 0.42 to 69.39.

Big Board volume increased slightly to 42.83 million shares, from 40.26 million Wednesday. Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 49.34 million shares. Big block trades of 10,000 or more shares on the NYSE totaled 682, compared with 534 on Wednesday. Standard Poor's index of 400 industrials picked up 1.04 to 133.89, and 500-stock composite index added 0.91 to 119.71. At the American Stock Exchange, the market-value index rose 2.38 to 308.33.

The NASDAQ composite index for the over-the-counter market closed at 189.85, up 0.42. The Wilshire index of 5,000 equities closed at 1,255.104 up 7.375, or 0.59, from the preceding trading day. A year ago the index stood at 1,400.071. For the 12-month period, the index high stands at 1,466.642, the low 1,171.085. Bond Prices Mixed In London, the Financial Times index of 30 industrial stocks closed at 473.2, up 0.8.

The 1981 high of 597.3 was set April 30. The low of 446.0 was set Jan. 14. The Tokyo Stock Exchange 225-share index closed at 7,352.49, off 141.64. The 1981 high of 8,019.14 was set Aug.

17. The low of 6,956.52 was set March 13. Corporate bond prices were mixed in quiet trading, with industrials unchanged and utilities up V4 point Government issues were up 732 point in intermediate and 932 point in long maturities. Short-term governments advanced 1732 point, according to the investment banking firm of Salomon Bros. Three-month Treasury bills were up 15 basis points to 13.30.

A basis point is one-hundredth of a percentage point. Six-month bills rose 8 basis points to 13.60, and one-year bills were up 2 basis points to 13.35. In municipal bond activity, both general obligations and dollar bonds were unchanged in light trading. Federal funds, the overnight loans of uncommitted reserves among commercial banks, traded at 15V4. Analysts said fears of a new rise in interest rates, which unsettled the markets earlier in the week, appeared to have abated a bit.

The Investment Company Institute, a mutual-fund trade association, reported that money-fund assets reached $164.5 billion, up $1.3 billion from a week earlier. Gainers among blue-chip and glamour issues included Alcoa, up lVi at 24 Vi. The company reported higher quarterly profits. MCA Makes Debut in Cable TV Zellerbach Acts to Improve Its Balance Sheet MCA Corp. made its debut in the cable television business with the announcement Thursday that it has purchased a one-third interest in USA Network, a satellite-fed system that reaches over 9 million homes.

Los Angeles-based MCA purchased its interest in equal parts from Time Inc. and Paramount Pictures Corp. Each assumed half ownership of the network earlier this month. All three corporations now hold one-third shares- MCA did not disclose the purchase price, but the network was valued at $30 million a few weeks ago. Both MCA and Paramount, along with two other movie studios, were partners in a proposed pay TV network called Premiere, which was blocked by a federal judge earlier this year on antitrust grounds.

Unlike Premiere, USA Network is supported by advertising and offers a broader range of programming, from sports to children's programs. But USA Network's new owners said in a joint news release Thursday that they are considering a "pay-per-view" service as well. Spokesmen for the companies declined to elaborate. Economist Wojnilower Sees Risk of Severe Recession Fed Urged to Ease Grip on Money, Credit By MARTIN BARON, Times Staff Writer Crown Zellerbach the ailing forest-products and paper company, Thursday announced two steps to shore up its financial picture. The San Francisco-based firm said it is offering 700 of its 7,500 salaried employees a sweetened early retirement program in an effort to cut its total work force of more than 24,000.

It also announced an agreement that would shed $50 million in debt from its balance sheet by swapping common stock for some debentures. The two announcements came only a week after Crown Zeller-bach's directors reportedly forced the company's long-time chief executive, C. Raymond Dahl, into early retirement at the age of 60. Dahl was succeeded by 52-year-old William T. Creson, Crown Zellerbach's president since 1977, who is widely perceived among analysts as more aggressive and active than his predecessor.

Reb Forte, analyst with Montgomery Securities in San Francisco, described the two company announcements Thursday as "symbolic" of the new style of leadership. "They're saying, 'Hey, listen, we're Please see ZELLERBACH, Page 2 By ROBERT MAGNUSON, Times Staff Writer 'it MJ A leading Wall Street economist Thursday issued a stern warning to the Federal Reserve Board, urging the nation's central bank to ease its tight grip on the money supply and credit or run the risk of hurtling the economy into a severe recession. Albert M. Wojnilower, chief economist and managing director of First Boston a New York-based investment banking firm, stressed in an interview here that the possibility of renewed inflation poses less of a threat to the U.S. economy right now than the specter of a new surge in interest rates.

His comments are in line with re jectly weak," he said, adding that "another shock to the housing and automobile industries might force them to disband themselves." The 51 -year-old economist cautioned that if the Fed does not ease up in the weeks ahead, short-term interest rates, which have been falling lately, probably will go up again and may reach record levels next year. Wojnilower, along with Henry Kaufman, of the Salomon Bros, investment banking firm, is considered to be among Wall Street's most influential economists. He was in Please see ECONOMIST, Page 2 cent statements by key Reagan Administration officials who also urged a loosening of Fed monetary policies, although Wojnilower said he questions the White House's commitment to a marked relaxation in Fed policy. If the Fed does not pursue a less restrictive monetary policy in he the weeks ahead, it could lead to a deep economic slump marked by widespread unemployment and "enormous threats of bankruptcies in industry and in state and local governments," he warned. "The economy could become ab Los Angela Timet Albert M.

Wojnilower Earnings Roundup SoCal Edison Net Up Sharply in Quarter, Nine Months Sale of 2 Units Puts Filmways in Black By KATHRYN HARRIS, Times Staff Writer Filmways after five consecutive quarters of losses, Thursday reported profits of $31.4 million, or $4.84 per share, for the quarter ended Aug. 31. But the Los Angeles-based movie company cautioned that its sale last June of insurance and data processing subsidiaries accounted for much of its reported profits. The company's loss from continuing operations grew to $10.5 million, or $1.63 per share, compared to a loss of $4.5 million, or 81 cents per share during the same quarter a year ago. Filmways cited its scarcity of new motion-picture releases as one reason for its $20-mil-lion loss from continuing operations in the first six months of its current fiscal year.

None of the company's four films released this year have been blockbusters. The $18-million film, "Blow Out," released July 24, has made $15.5 million in gross box office sales, a Filmways spokeswoman said. Filmways said another factor contributing to the six-month loss from continuing operations was $10.4 million paid in interest expenses for its short-term loans. After the sale of its two subsidiaries, Filmways reduced its short-term debt of $116 million to slightly less than $30 million, the spokeswoman said. From Times Wire Services Southern California Edison Co.

Thursday reported sharply higher revenues, earnings and earnings per share for the third quarter ended Sept. 30. The Rosemead-headquartered utility attributed the improved profitability to the 1981 general rate increase, increased use of electricity, and continued emphasis on productivity and cost controls. For the three months Edison reported net income of $147.9 million, or $1.52 per share, compared with $88.4 million a year earlier. Revenues for the period rose to $1.12 billion, up 6 from 1980's $1.06 billion.

Earnings for the nine months rose to $362.05 million, from $247.04 million a year earlier. Revenues for all three quarters totaled $3.01 billion, compared with last year's $2.41 billion. Southern California Edison's chairman, William R. Gould, said that even though the utility's earnings had improved from last year's severely depressed results, earnings per share "restore us to only approximately the level of earnings recorded in 1979." Gould also pointed out that the company is not earning the 11.2 return authorized by the California Public Utilities Commission. General Telephone Posts Higher Earnings General Telephone Electronics the nation's second-largest utility, said its earnings rose 11 to $159.7 million in the third quarter, from $143.9 million in period last year.

Consolidated earnings for the third quarter totaled $53.6 million, up 10 from $48.9 million a year ago. Percentage gains on a per-share basis for both reporting periods, however, were less because of additional shares issued from convertible debentures on March 31, 1981. All results are before securities gains or losses which were not material in any of the periods, the company reported. The company's total assets rose to $31.1 billion at the end of the third quarter, up 15 from $27 billion a year ago. Total deposits were $22.5 billion, up 12 from $20.1 billion.

Loans at the quarter's end were $20.7 billion, up $3.1 billion, or 18, from the $17.6 billion at the end of the 1980 third quarter. TRW's Profits Rise Almost 70 TRW a Cleveland-based high-technology manufacturer, said it earned $83 million in the third quarter of 1981, up nearly 70 from the same 1980 period because of a one-time gain of $30.4 million from the sale of some assets. Without the extraordinary gain, earnings would have been up 7.5 at $52.6 million, compared with the $48.9 million it earned in the same period last year. Sales for the period were $1.29 billion, up 8 from $1.19 billion in the 1980 quarter. Please see EARNINGS, Page 2 the same 1980 period.

Revenues for the quarter were up 11, to $2.73 billion from $2.46 billion. Results for the year-earlier period did not include a $64-million loss taken in connection with the company's sale of part of its consumer electronics business and preparations to sell the remaining portions of that business. Also, results for both periods did not include the effects of Canadian currency translation on telephone operations. "Rate increases, continued growth in long-distance calling and the continuing benefits of the company's productivity and cost-reduction programs have resulted in the record improvement in net income," said Theodore F. Brophy, chairman and chief executive officer of the Stanford, Conn.

-based utility. Security Pacific Posts Record Earnings Security Pacific Los Angeles, reported record earnings for both the third quarter and first nine months of this year. Richard J. Flamson III, chairman and chief executive of the bank holding company, attributed the gains to increased net interest income, non-interest income and earnings from international banking activities. In the first nine months of 1981, consolidated earnings totaled $153.6 million, up 16 from $132 million in the same.