U.S. Unveils Plan to Make It Easier to Get Home Loans

Federal mortgage loans totaling $7 billion--aimed at putting 75,000 Los Angeles low- and moderate-income families in homes of their own--will be made available under a new program announced Tuesday by Fannie Mae, the federal mortgage program.

The plan was unveiled at a news conference attended by Mayor Richard Riordan, Sen. Dianne Feinstein (D-Calif.) and Rep. Brad Sherman (D-Sherman Oaks).

Los Angeles is one of several cities targeted by the agency, which plans to spend $1 trillion nationwide on loans by the end of the decade.

Under the Los Angeles program, to be administered by House Los Angeles, a partnership between Fannie Mae and the city, prospective homeowners will be eligible for loans of up to $210,000 that are designed to make it easier to qualify for a mortgage.

The program will back loans that require only a 3% down payment as well as loans that are part of lease-to-buy arrangements with nonprofit organizations such as Habitat for Humanity. Buyers could also qualify for loans on fixer-uppers that have extra money built in to pay for remodeling.

“We realize the housing market is down in L.A., but we’re here for the long haul,” said Barbara Zeidman, director of House Los Angeles. Fixing up old housing stock and helping low- to moderate-income residents buy homes “helps the city become a place that people want to live in.”

The $7-billion program announced Tuesday will also help the city redeploy as much as $100 million in funds now being loaned to developers to repair earthquake-damaged apartment buildings, said city housing Director Gary Squier. Fannie Mae would help refinance the loans, and the city would get most of its money back to be used for other purposes, Squier said. A similar program set up two years ago has allowed the city to take back about $100 million.

Feinstein praised the program and the way the agency has provided funds for earthquake repairs for apartments.

Gesturing to newly repaired buildings at the site of the ceremony in Sherman Oaks, she said that the blend of low- and moderate-income residents in the buildings would keep the city vital.

“I remember coming here right after the earthquake,” she said. “I remember seeing these buildings down.”

Typically, Fannie Mae works with private lenders, agreeing to buy or guarantee loans if certain conditions are met. Some of the packages are quite specific, designed, for example, to help homeowners remodel if they need to install ramps for a disabled family member. Or disabled buyers can go to Fannie Mae for mortgages for which Social Security or welfare is considered qualifying income for the loans.

Buyers who earn less than $60,000 a year can also apply for loans that feature tax credits of up to 20% on mortgage interest, and for so-called soft second mortgages, in which a buyer borrows money to get into a house but doesn’t have to pay interest on it until the house is sold.

An earlier mortgage program begun two years ago provided mortgages for 30,000 families.