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                                                                   EXHIBIT 10.15

                     SEVERANCE AGREEMENT AND GENERAL RELEASE

     This  Severance  Agreement and General  Release  ("Agreement")  is made and
entered  into this 6th day of  February,  1997,  by and among  Downey  Financial
Corp., a Delaware  corporation  ("DFC"),  Downey  Savings and Loan  Association,
F.A., a federally  chartered savings  association and wholly owned subsidiary of
DFC ("DSLA"), and Stephen W. Prough, an individual  ("Executive").  For purposes
of this Agreement, DFC, DSLA and/or their respective subsidiaries and affiliates
may collectively be referred to as the "Company" as the context  requires.  This
Agreement is entered into with reference to the following:

                                    RECITALS

     A.  Executive  has served as Chief  Executive  Officer,  President and as a
director  of  DFC,  DSLA  and  certain  of  their  respective  subsidiaries  and
affiliates,  pursuant to that certain Employment Agreement between Executive and
DSLA, dated June 14, 1994, as amended and extended (the "Employment Agreement");

     B. By  letter  dated  February  6, 1997 to the  DFC's  Board of  Directors,
Executive has  determined to resign his  respective  positions with the Company,
such  resignation  to be effective as of the close of the Company's  business on
February 14, 1997 (the "Effective Date");

     C. The Company wishes to accept Executive's  resignation,  such resignation
to be effective as of the close of the Company's business on the Effective Date,
to terminate the  Employment  Agreement as of the Effective  Date and to provide
Executive with certain severance benefits, all as set forth herein;

     D. As part of this Agreement and in consideration of certain accommodations
provided to Executive by the Company hereunder,  Executive has agreed to release
the  Company  and its  respective  directors,  officers,  employees,  agents and
assigns from all claims and causes of action that Executive may now or hereafter
have, whether known or unknown.

     NOW,  THEREFORE,  IN  CONSIDERATION  OF the foregoing  recitals,  which are
incorporated as an integral part of this  Agreement,  the mutual promises of the
parties and other good and valuable consideration the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:

                                    AGREEMENT

     1.  RESIGNATION  OF EXECUTIVE.  Executive  hereby  irrevocably  resigns his
positions as director  and officer of the Company,  effective as of the close of
the Company's business on the Effective Date.

     2. SEVERANCE PAYMENT. On the Effective Date, the Company shall pay or shall
cause to be paid to Executive,  in cash or other readily  available  funds,  the
gross  sum of Eight  Hundred  Thousand  Dollars  ($800,000),  less  any  amounts
required  to be  deducted  by the  Company  for federal and state taxes or other
applicable requirements.

     3. STOCK OPTIONS.  The parties hereby acknowledge that Executive  presently
owns vested stock options (the "Stock Options")  entitling  Executive to acquire
78,750 shares of DFC Common Stock (the "Number of Vested  Option  Shares") at an
exercise  price of $13.57  per share.  The  parties  hereby  agree  that,  as an
accommodation  to  Executive,  on the Effective  Date,  the Company shall pay or
cause to be paid to Executive, in cash or other readily available funds, the sum
of Five Hundred  Eighty Five Thousand One Hundred Twelve Dollars and Fifty Cents
($585,112.50),  less any  amounts  required  to be  deducted  by the Company for
federal and state taxes or other applicable  requirements,  which sum represents
the  difference  between the exercise price of the Stock Options and the closing
market value of DFC's Common  Stock on the New York Stock  Exchange  ($21.00 per
share) as of January 30, 1997, multiplied by the Number of Vested Option Shares.
Upon receipt of such payment, Executive shall surrender the Stock Options to the
Company.  The parties further acknowledge and agree that Executive shall have no
further  rights with respect to the Stock Options or any other DFC stock options
or awards,  and that all previously  granted stock options shall terminate as of
the Effective Date.

     4. TERMINATION OF EMPLOYMENT  Agreement.  The Employment Agreement shall be
terminated as of the Effective Date, and all obligations of any party thereunder
shall thereby be forever released and discharged.




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     5. 1996  INCENTIVE  COMPENSATION.  The parties  acknowledge  and agree that
Executive has received the full amount of incentive compensation owed to him for
1996 under the  Company's  incentive  compensation  program  and the  Employment
Agreement,  and that  Executive  is not  entitled  to any  additional  incentive
compensation hereunder or thereunder.

     6. 1997 BASE SALARY.  On the Effective Date, the Company shall pay or cause
to be paid to Executive, in cash or other readily available funds, the gross sum
of Sixteen  Thousand  Six Hundred and Sixty Seven  Dollars  ($16,667),  less any
amounts  required  to be  deducted by the Company for federal and state taxes or
other applicable requirements, which amount represents the full remaining amount
of base salary  that  Executive  is  entitled to receive  under the terms of the
Employment Agreement to the Effective Date.

     7. DEFERRED  COMPENSATION PAYMENT. On the Effective Date, the Company shall
pay or cause to be paid to Executive,  in cash or other readily available funds,
the sum of Two Hundred Ten Thousand  Four  Hundred  Fifty Six Dollars and Ninety
Five Cents  ($210,456.95),  less any  amounts  required  to be  deducted  by the
Company  for federal and state  taxes or other  applicable  requirements,  which
amount  represents  the full amount of deferred  compensation,  inclusive of all
accrued  interest  that  Executive is entitled to receive under the terms of the
Company's Deferred  Compensation  Plan, as calculated  pursuant to the crediting
rate methodology.

     8.  HEALTH/OTHER   BENEFITS.   Executive  shall  be  entitled  to  continue
participation  in all Company  health and other benefit  programs to which he is
currently  entitled from the date hereof through February 28, 1997.  Thereafter,
Executive  shall be  entitled  to receive  the  benefits to which he is entitled
pursuant  to the  Consolidated  Budget  Reconciliation  Act of 1985,  as amended
("COBRA"), which shall be provided in accordance with the terms of the Company's
health benefit plans.  No health or  postemployment  benefits,  other than those
provided for under COBRA, shall be provided to Executive hereunder.

     9. ACCRUED  VACATION PAY. On the Effective  Date,  the Company shall pay or
cause to be paid to Executive, in cash or other readily available funds, the sum
of Sixty Six Thousand  Three  Hundred  Forty Four Dollars and Ninety Three Cents
($66,344.93),  less any  amounts  required  to be  deducted  by the  Company for
federal  and  state  taxes  or  other  applicable  requirements,   which  amount
represents  the full  amount of  accrued  but  unused  vacation  pay owed by the
Company to Executive through the Effective Date.

     10. MUTUAL GENERAL  RELEASE.  In further  consideration of the promises and
agreements  made  hereunder,  Executive  agrees  unconditionally  and forever to
release and discharge the Company and its respective  subsidiaries,  affiliates,
officers, directors, employees, representatives,  attorneys, agents and assigns,
and the Company  agrees  unconditionally  and  forever to release and  discharge
Executive and his representatives,  attorneys,  agents and assigns, from any and
all claims, actions, causes of action, demands,  liabilities,  rights or damages
of any kind or  nature  which any of them may now have,  or ever  have,  whether
known or unknown,  against the other,  including any claims, causes of action or
demands of any  nature  arising  out of or in any way  relating  to  Executive's
employment with, or separation from the Company.

     This release specifically  includes,  but is not limited to, any claims for
discrimination  and/or  violation  of  any  statutes,   rules,   regulations  or
ordinances,  whether  federal,  state or local,  including,  but not limited to,
Title VII of the Civil Rights Act of 1964, as amended,  age claims under the Age
Discrimination  in  Employment  Act of 1967,  as  amended  by the Older  Workers
Benefits  Protection Act of 1990,  Section 1981 of Title 42 of the United States
Code, and the California Fair Employment and Housing Act.

     The parties further agree knowingly to waive the provisions and protections
of Section 1542 of the California Civil Code, which reads:

               A general  release  does not extend to claims  which the creditor
               does not  know or  suspect  to exist in his  favor at the time of
               executing  the  release,  which,  if  known  by  him,  must  have
               materially affected his settlement with the debtor.

     Executive  represents  and  agrees  that,  prior to the  execution  of this
Agreement,  Executive  has had the  opportunity  to  discuss  the  terms of this
Agreement with legal counsel of his choosing.  Executive affirms that no promise
or inducement was made to cause him to enter into this Agreement, other than the
severance benefits described 



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herein.  Executive  further  confirms  that he has not  relied  upon  any  other
statement or  representation by anyone other than what is in this Agreement as a
basis for his agreement.

     11. TRADE  SECRETS/CONFIDENTIALITY/SURRENDER OF COMPANY PROPERTY. Except as
may be required by law,  regulation or court order,  Executive shall not divulge
any proprietary  information or trade secrets of the Company and shall otherwise
respect  the  confidential  nature  of such  proprietary  information  and trade
secrets.  Executive  shall  surrender  all  Company  property on or prior to the
Effective Date.

     12. NEWS RELEASE.  The parties shall cooperate in the preparation of a news
release for dissemination on or prior to the Effective Date.

     13.  REIMBURSEMENT  OF BUSINESS  EXPENSES.  Executive  shall be entitled to
reimbursement of properly  submitted claims for business  expenses in accordance
with the Company's policies and practices through the Effective Date.

     14.  INDEMNIFICATION.  The Company shall indemnify  Executive in accordance
with the  indemnification  obligations  under the Company's  charter  documents,
including the respective certificate of incorporation, federal stock charter and
bylaws of DFC, DSLA or their respective subsidiaries or affiliates,  as the case
may be, and otherwise as is consistent  with  applicable law, in connection with
claims or causes of action  relating to or otherwise  arising in connection with
Executive's  service to the Company.  Upon  reasonable  notice from the Company,
Executive  shall make  himself  reasonably  available  to assist  and  otherwise
cooperate with the Company in connection with any litigation  matters  involving
the Company.

     15.  NON-DISPARAGEMENT.  The parties  hereby  agree that none of them shall
disparage  the  other in any  future  statements  or  communications  concerning
Executive and his employment with the Company or otherwise.

     16.  INQUIRIES BY THIRD  PARTIES.  The parties  hereby agree that they will
consult with one another with respect to appropriate responses to inquiries from
stock exchanges,  analysts, the press, customers,  governmental  authorities and
other third parties  regarding  Executive's  resignation  from the Company.  The
parties  further agree that,  except as required by law or  regulation,  none of
them will respond to such  inquiries or make other public  statements  regarding
these  matters  (other than the news  release  referred to in Section 12 hereof)
until such consultation has occurred.

     17.  ARBITRATION.  Any and all disputes or claims  arising out of or in any
way related to Executive's  employment with, or separation from the Company,  as
well as any and all  disputes or claims  arising out of or in any way related to
this Agreement,  including without  limitation,  fraud in the inducement of this
Agreement,  or  relating  to the  general  validity  or  enforceability  of this
Agreement,  shall be  submitted  to final  and  binding  arbitration  before  an
arbitrator of the American Arbitration Association in Orange County,  California
in accordance with the rules of that body governing commercial disputes, and the
prevailing  party shall be entitled to  reasonable  costs and  attorneys'  fees.
Judgment  on the award  rendered by the  arbitrator  may be entered in any court
having jurisdiction thereof.

     18.  GOVERNING LAW. This Agreement shall be construed under the laws of the
State of California, both procedural and substantive,  except as may be required
under federal laws and  regulations  applicable to federally  chartered  savings
associations or their subsidiaries or affiliates.

     19. REVOCATION RIGHT.  Executive acknowledges that he has been advised that
he has twenty-one  (21) days to consider this Agreement and that he was informed
that he has the right to consult with counsel  regarding this Agreement.  To the
extent that Executive has taken less than  twenty-one (21) days to consider this
Agreement,  Executive  acknowledges  that he has had sufficient time to consider
the Agreement and to consult with counsel and that he does not desire additional
time.  This  Agreement is revocable by Executive  for a period of seven (7) days
following Executive's  execution of this Agreement.  The revocation by Executive
of this Agreement must be in writing,  must specifically  revoke this Agreement,
and must be received by the Company  prior to the eighth (8th) day following the
execution of this  Agreement by Executive.  This  Agreement  becomes  effective,
enforceable  and  irrevocable  on the  eighth  (8th) day  following  Executive's
execution of the Agreement.

     20.  MISCELLANEOUS.  This Agreement sets forth the entire agreement between
Executive and the Company  relating to the subject  matter hereof and supersedes
all prior  oral or  written  agreements  relating  thereto,  including,  without
limitation,  the Employment Agreement.  This Agreement shall be binding upon all
parties' respective




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heirs, representatives, successors and assigns. If any portion of this Agreement
is found to be  illegal  or  unenforceable,  such  action  shall not  affect the
validity or enforceability of the remaining  paragraphs or subparagraphs of this
Agreement.  No amendments  to this  Agreement  will be valid unless  written and
signed by  Executive  and an  authorized  representative  of the  Company.  This
Agreement  may be  executed  in one or more  counterparts,  all of which,  taken
together,  shall constitute one original document.  The undersigned agree to the
terms of this  Agreement  and  voluntarily  enter  into it with the intent to be
bound thereby.




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     IN WITNESS WHEREOF,  the parties have executed this Agreement as of the day
and year first written above.

EXECUTIVE:                  DOWNEY FINANCIAL CORP.


     /s/ STEVEN W. PROUGH        By:        /s/ DONALD E. ROYER
-------------------------------     --------------------------------------------
Stephen W. Prough                   Donald E. Royer
                                    Executive Vice President and General Counsel

                                 DOWNEY SAVINGS & LOAN ASSOCIATION, F.A.

                                 By:          /s/ DONALD E. ROYER
                                    --------------------------------------------
                                    Donald E. Royer
                                    Executive Vice President and General Counsel


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