Regulators Curb Westwood Savings : State Tightens Reins, Says S&L; Is in ‘Unsound Condition’

California savings and loan regulators have placed stiff operating restrictions on Westwood Savings & Loan Assn. because the financial institution is in an “unsafe and unsound condition,” according to regulatory records obtained by The Times.

Westwood Savings is under orders from the California Department of Savings and Loan to bolster its lending standards and limit the size and type of loans it is making, the documents show.

Executives of the Los Angeles savings and loan company and regulatory officials from the Department of Savings and Loan could not be reached for comment. However, the regulatory decrees were confirmed by Randy Nonberg, an outside attorney for Westwood Savings.

“We’re cooperating fully” to meet the terms of the edicts, Nonberg said, referring to a cease-and-desist order issued July 19, 1985, and a confidential letter sent to Westwood’s board of directors by the state regulators Sept. 27. The terms of both those directives remain in effect, the attorney confirmed.

The news, which came to light when copies of the documents were provided to a reporter this week, is further evidence of the immense financial problems facing Westwood Savings, a privately owned stock company that operates six branch offices in Santa Monica, Encino and on Los Angeles’ Westside.

The savings and loan association is the successor institution to California Women’s Savings & Loan Assn., which was founded in 1978 to help women obtain credit and other financial services. Its $679 million in assets make it among the 50 largest among California’s 220 savings and loans.

It was disclosed last month that Westwood Savings is the lead lender on $181 million in troubled real estate loans made to a development firm controlled by Dallas entrepreneur Craig Hall. Though Westwood officials confirmed the report, they pointed out that the “majority” of the $181 million had been put up by other investors.

Westwood Savings is also reporting large losses at a time when the industry as a whole is reporting record profits. The latest figures from the Federal Home Loan Bank of San Francisco indicate that Westwood lost $1.76 million in the third quarter ended Sept. 30.

Regulators say Westwood has regularly exceeded lending limits to a single customer, has properties worth millions of dollars that are over-appraised and has a net worth that is expected to fall below regulatory minimums. Net worth measures a financial institution’s assets minus liabilities.

Robert Morris, chief examiner for the state regulatory agency, said in the Sept. 27 letter to the board that Westwood Savings’ single-customer lending limit of $20.7 million had been exceeded by three borrowers, including $77.2 million owed by Hall Real Estate Group. The lending limit of each savings and loan is determined by a formula based on its assets.

“Please provide the department with the present status of the association’s plan to reduce your loans to (these) borrowers and explain your continued non-compliance” with the regulations, Morris told the board.

Limit on Loans

Morris also noted that a Westwood Savings subsidiary had violated department regulations by its continued purchase of “equity securities,” meaning stocks. He also directed the S&L; to stop purchasing real estate for development.

The cease-and-desist order, meanwhile, prohibited the S&L; from making loans of more than $500,000 without the permission of at least four members of its board of directors. The board is chaired by developer Edward Israel, who also took over as chief executive last August after Ron Shenkman resigned, attorney Nonberg said.