May Affect Loans : FHA Studying Neighborhood at Waste Site

The Federal Housing Administration is conducting an environmental review to determine whether to insure loans on homes near the McColl hazardous waste dump in Fullerton, officials said Thursday.

The federal agency recently suspended a loan on a two-bedroom condominium worth $98,000 on Coventry Circle in the Coyote Hills development when it learned that the property was within 2,000 feet of the World War II petroleum waste dumping site.

It apparently was the first time the FHA stopped a loan because of a property’s proximity to the abandoned hazardous waste site, although other homes in the area have had FHA loans approved in the past, officials said.

However, after intervention by Rep. William E. Dannemeyer (R-Fullerton), the FHA agreed to proceed with the loan on the Coventry Circle condominium while the agency performs an environmental review, a spokesman said Thursday.

“We’ve done a preliminary review, and we found no reason to not proceed with the loan,” said Todd Thakar, spokesman for the FHA regional office in San Francisco. “We’ll continue to do further review . . . but at this point, we see no reason not to proceed as usual.”

Thakar said FHA policy is to perform a review and develop a policy on a particular neighborhood where there are environmental concerns when it receives an application on a specific property. After the McColl review, which is expected to take about two weeks, the FHA will decide whether to approve loans on area properties in the future, he said.

Under the federal Housing and Urban Development Code, a property cannot be insured when there is an environmental hazard affecting the homeowner’s health and safety, Thakar said.

Depending on the outcome of the environmental review, the sale of hundreds of homes in the area could be affected, officials said.

Currently, the loan on the Coventry Circle condominium--being sold by Charles and Debra Morrison--is the only McColl-area property before the FHA. Thakar said the agency will continue to accept applications from the area, pending the conclusion of the review.

The FHA was notified of the Morrison property’s proximity to the McColl dump by GlenfedMortgage Corp., which is financing the loan, Thakar said. No previous loans on McColl-area properties had ever been called to the FHA’s attention, he said.

The McColl dump, which lies under a vacant field and a portion of a golf course, is a federal Superfund site that the state has been studying and attempting to clean up for more than five years. A $26.5-million plan to excavate the waste and haul it to a Kern County disposal site was aborted last year when a Superior Court judge there ordered state health officials to conduct a full environmental study.

The problem on the Morrison property arose when the lender was processing a new type of FHA-insured loan called a “direct endorsement” loan, said Mike Bonk, senior staff assistant to Dannemeyer.

In going over escrow instructions, the lender saw that the buyer was required to sign an acknowledgement that the property was within 2,000 feet of the hazardous waste site, Bonk said. Unsure how that requirement affected the loan’s processing, the lender called the FHA, and the agency suspended the loan pending the environmental review, he said.

The lender then “canceled the package and denied the loan,” Bonk said. That’s when the real estate broker asked for Dannemeyer’s help, he said. Since the FHA’s decision to go ahead with the application, the lender has reinstated the loan, he said.

Dannemeyer believes that the FHA should continue to approve loans on the McColl-area property, aide Dwayne Crum said.

While it is “good news” that the FHA is proceeding with the Morrison property loan, Dannemeyer said in a prepared statement, “I will continue to pressure them to reach the conclusion that the FHA should continue to insure properties near the McColl site as a general matter, as it’s been doing all along. Residents near the site have gone through enough already without being penalized in this manner.”

The Morrisons and their real estate broker could not be reached for comment.