Community thrifts in Los Angeles, already hurting from the downturn in realty prices over the last three years, could face aftershocks in their multifamily portfolios from the Northridge earthquake in January.

The reason? Owners of multi-family properties, the hardest hit in the quake, are having trouble qualifying for disaster relief, according to bankers and government-aid officials.

Further, even when landlords do qualify, the process for funding low-interest disaster relief loans is unbearably slow, bankers say.

"What we are seeing is a tendency on the part of owners to just hand us the keys, saying 'We don't want the problem anymore,'" said J.L. Jerry Thomas, chief executive of Quaker City Savings and Loan Association in Whittier, Calif.

Details on Only One Thrift

Of the 29 thrifts in Los Angeles County with assets of less than $2 billion, five have multi-family-loan portfolios that equal more than one-quarter of their assets. Phone calls to executives at four of the five thrifts went unreturned.

So far Quaker City is the only thrift to give a detailed accounting of its earthquake-related losses and the impact of the disaster assistance - or lack of it - on its multifamily portfolio.

"I would want to talk to thrifts that have large multifamily portfolios in Los Angeles before I make a prediction," said one analyst.

Mr. Thomas was the only thrift executive in Los Angeles who would talk openly of the problem. "It's not something you want to be quoted complaining about," said one thrift executive.

Low-Income Renters Hurt

Mr. Thomas said the federal government's response to the quake is having the effect of cutting low-income renters - who often need assistance the most - out of the disaster relief process, and could turn lenders into reluctant landlords of damaged and unsalable properties.

He cited a University of California-Berkeley study of the 1989 Loma Prieta Earthquake in San Francisco that tracked disaster relief funds. The study found that although only 40% of the property damage was done to single-family homes, single-family home owners received more than 80% of the relief funds.

"We expect that every single apartment house that has experienced moderate to extensive damage to come back to the association as [real estate owned]," Mr. Thomas said.

"I would suspect the same thing is in store for some other local lenders. The situation is still in front of us even though we're six months out from the disaster itself."

Earlier this year Quaker City identified 38 loans, with a total balance of $12.7 million, as having been affected by the quake. Of the 38 loans, 21 with a balance of $7.6 million were in default, the vast majority of them loans on apartment building.

Mr. Thomas said that right after the earthquake, he anticipated federal disaster assistance, in the form of low-rate loans from the Small Business Administration, would help multifamily-apartment owners.

He said last week that he had given up hope that the federal government would be able to save the properties, and that he expects 16 apartment loans with a total balance of $6.8 million will come back to the association.

Quaker city said last Friday that it would lose $2.3 million for its fiscal year ended June 30 with most of the loss linked with heavy quake-related reserves.

Basic Loan Criteria Used

Becky Brantley, a loan officer for the SBA's Office of Disaster Assistance, said the agency had to make loans on basic underwriting criteria, which for an already shaky low-income apartment building means no loan.

"If they were barely making it by previously," she said, "they probably can't afford another loan payment."

The SBA office, the primary method of federal assistance to disaster victims, has approved 17,213 loans out of the 46,213 business applications it has received, totaling $1.73 billion.

Multifamily property owners are included in business borrowers, and aren't broken out, Ms. Brantley said. A total of $2.94 loans in disaster assistance loans have been funded for the Northridge earthquake.

"One of the things we've heard is that our borrowers are very surprised by some of the eligibility requirements," said Willis Newton, chief financial officer of San Francisco's First Republic Bancorp, a thrift with $14 million in earthquake-affected nonperforming loans in Los Angeles.

"We do have several people there who, I understand, have finally gotten checks."

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