Loans

Lloyd Charton recalls a fateful knock on the door. At his Dana Point home stood a cheerful man with an impressive knowledge of Charton's personal life. It was a neighbor, Dan J. Harkey. Harkey congratulated him on his retirement and asked about a recent vacation. He told him about his company, Point Center Financial Inc., which raised money from private investors and lent it to real estate developers.

Gov. Arnold Schwarzenegger vowed Wednesday to let California government come to a "grinding halt" rather than agree to a high-interest loan to keep the state afloat if he and the Legislature do not close the yawning budget gap in coming weeks. At the same time, the governor reversed himself on a proposal to end health insurance for families of police officers and firefighters who died in the line of duty.

Business at Fresco Cafe North in Goleta is built on grilled chicken sandwiches, Gorgonzola-and-walnut salads and a $135,000 loan backed by the Small Business Administration. Owner Indras Govender has had a triple helping of SBA loans since 1995, each used to serve up a new restaurant. In May, he and his wife, Tilly, got their latest from Community West Bank to transform their pizzeria into an eclectic lunch and dinner spot that features giant cupcakes and other desserts.

After nearly running out of money in its small-business loan funds last month, Valley Economic Development Center Inc. of Van Nuys says it is getting $16 million to enable it to continue to lend to Southern California firms caught in the stubborn credit crunch. Most of the money -- $15 million -- is coming from the city of Los Angeles. Last week, Merrill Lynch & Co. said it would supply the group with $1 million.

Accusing Wells Fargo & Co. of discriminating against minority borrowers by steering them into subprime mortgages, Illinois' attorney general sued the San Francisco bank, asking a state court to negate the loans and to fine Wells, the nation's largest home lender. "The dreams of many hardworking families have ended in foreclosure due to Wells Fargo's illegal and unfair conduct," Atty. Gen. Lisa Madigan said in filing the lawsuit Friday in Cook County Circuit Court.

Citigroup Inc. is in talks to sell $12 billion of junk-grade corporate loans to Apollo Management, Blackstone Group and TPG Inc. as part of an effort to shrink the bank's balance sheet, a person familiar with the matter said. The loans are part of $43 billion of leveraged-buyout debt that Citigroup was stuck with last year after credit markets froze. The company, the biggest U.S. bank as measured by assets, could complete the sale by next week, when it is expected to report first-quarter results.

Wachovia Corp. is revising the underwriting policies in its mortgage loan business, a step that could make it harder to take out a home loan at the nation's fourth-largest bank. The Charlotte, N.C.-based company said the new guidelines for its portfolio loans, or those it keeps on its books, take effect this month. They are aimed at reducing Wachovia's exposure to risky home loans that tend to lead to foreclosures. "We want to ensure Wachovia maintains strong credit quality and we are making sure we're putting customers in the right loans," Wachovia spokesman Don Vecchiarello said.

In better economic times, Santa Clarita mortgage broker Fred Arnold relied on a home equity line of credit if his cash flow was uneven and he needed to cover payroll. But when home sales crumbled last fall, there was no such backstop for the business. His home was still worth more than the mortgage, but his bank was retrenching and had shut down the credit line. So Arnold sold his house, used some of the proceeds to keep his business afloat and bought a smaller home.

California's attorney general has settled a lawsuit against H&R Block Inc. over a widely used loan program that gives the nation's largest tax preparer a chunk of customers' tax refunds. Atty. Gen. Jerry Brown said Friday that the $4.85-million settlement would stop H&R Block from offering high-cost loans it had marketed as early tax refunds. Former Atty. Gen. Bill Lockyer sued H&R Block in 2006, adding California to a long list of others that sued over its "refund anticipation loans."

The Treasury is unlikely to get back the full amount of money lent under the Troubled Asset Relief Program despite a recent spate of repayments from large banks, warned the program's watchdog. The program "played a significant role" in rescuing the financial system from a meltdown, Neil Barofsky, special inspector general for TARP, testified before the Senate Banking Committee on Thursday. But it was "extremely unlikely that the taxpayer will see a full return on its TARP investment," according to his prepared testimony.