Simi Council OKs Bond Issue to Help Home Buyers : $16 Million Planned for Loans, Down Payments

The Simi Valley City Council on Monday night unanimously gave final approval to a program that will provide low-interest loans to first-time home buyers with modest incomes and, for the first time, subsidize their down payments.

Under the plan, the city will issue $15 million in tax-exempt municipal bonds to cover the 125 loans and kick in slightly more than $1 million in local redevelopment funds to provide second mortgages for down payments.

“It’s not a perfect solution,” Councilwoman Vicky Howard said. “But we’re going to help as many people as we can as best we can.”

Deputy City Manager Jay Corey said unanimous concern by the council over the escalating price of homes prompted the plan, which has been under discussion about 10 months. The city has issued bonds for housing loans--a common practice under state and federal programs--at least three other times but the “down payment assistance is innovative,” Corey said.

Recycling Revenues

The $1.125 million for the down payment loans will come from property taxes paid to the Simi Valley Community Redevelopment Agency. Under state law, 20% of a redevelopment agency’s revenues must be recycled to provide affordable housing within five years of their receipt.

Corey said he knew of no other city using such funds to subsidize down payments for home buyers. A spokesman for the state Community Redevelopment Agencies Assn. in Sacramento also said he knew of no other such program, although he could not be certain that it was unique.

“I think they’re showing some creativity on it,” said William A. Carlson, the association’s deputy director. “How unique it is I don’t know.”

Carlson called the down payment loans “a very effective use of their money.”

$50,140 Income Cap

The 30-year, fixed-rate mortgages will be limited to families with annual incomes no higher than $50,140 and will have interest rates between 8 and 9%, said Frederick W. Buss, the city’s interim housing program manager. Although the program is geared to first-time buyers, those who have not owned homes in the past three years would also be eligible, according to the program’s guidelines.

The second mortgages will fund up to 75% of the down payment. Applicants can expect to provide about 10% of the home’s total cost in cash--about 5% for the down payment and the rest for closing costs, said Michael Hakan of Pacific Central Mortgage, the firm that will manage the loan program.

According to the city’s tentative schedule, applications will be accepted beginning Sept. 17. Eligible applicants will be chosen on a first-come, first-served basis.

Borrowers could use the money to purchase resold homes costing up to $185,000, as well as for renovations to the homes. But the bulk of the lending funds raised through the bonds--$9 million--will be used for newly built units in two condominium complexes.

The larger of the two projects, a 99-unit complex at Erringer Road and Alamo Street, is being built by the Los Angeles-based Casden Co. The other, a 22-unit complex being developed by Simi Valley builder Harold Geer, is obtaining permits to build on Apricot Road. Corey estimated that condominiums at both sites would cost $160,000.

The city had applied for $20 million in bonds and hoped to provide 167 loans but the state approved only $15 million--enough for about 125 loans.

The city has already received 200 inquiries about the loans even though the program has yet to be formally advertised.

“Just the mention of such a program triggers questions from individuals,” Buss said. “We have a community very interested in housing, a council very interested in housing, and they discuss these issues.”