Perpetual Federal Savings and Loan will make available at least $70 million in new mortgage funds as a result of the sale of $130 million of its residential mortgages to Salomon Bros., Perpetual President Thomas J. Owen said yesterday.
Washington's largest savings and loan is selling about 4,900 mortgages so that it can benefit from recent Internal Revenue Service regulations, Owen said. Most of the funds will go toward loans for homebuyers in the Washington area, Owen said, and the remainder will be used to help pay off $25 million in real estate taxes on existing mortgages, $20 million owed to the Federal Home Loan Bank Board and other obligations.
The sale for about $106.7 million will cause a net operating loss of about $6 million for this fiscal year, Owen said, but it will produce an overall increase in the firm's loan portfolio because of the tax benefit.
"The loan sale is another means of generating funds for mortgages," Owen said. "The reduction fo $6 million in reserves on Perpetual's statement of condition will be more than offset by the positive effects of the sale."
The mortgages being sold are lower-yielding residential mortgages with coupon rates between 5.5 percent and 7.75 percent. The sale thus enables Perpetual to convert those loans into cash for reinvestment at current market rates.
The mortgages being sold are all "Maryland and Virginia properties," Owen said in an interview. "They seem to have more appeal in the secondary market."
Less than two months ago Perpetual pumped an additional $25 million into the area's tight mortgage market when it became one of the first financial institutions in the country to issue unsecured notes. The savings and loan issued the notes under a new procedure authorized last January by the Federal Home Loan Bank Board.
At that time, Perpetual restricted mortgages to its customers because the 11 percent usury ceiling in the District caused mortgage money to evaporate.
Owen said yesterday that the market is still tight but that the temporary lifting of the District's usury ceiling has made it possible to make more loans in the city. Owen said the average interest rate is about 11.12 percent.