Obstacle Course : Blacks Frequently Find Frustrating Roadblocks in Trying to Buy Houses

Blacks seeking to buy homes in Los Angeles County frequently tell of frustrating roadblocks: stringent scrutiny of past credit problems, disappointing appraisals and a reluctance on the part of private mortgage insurers to provide the insurance that lenders demand when a buyer cannot come up with the conventional 20% down payment.

Here are some of the successful and not-so-successful experiences of four black households trying to finance homes in Los Angeles.

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As postal workers, Patsy Parker and her brother, Barry, have the kind of steady jobs and income that usually give lenders comfort. But buying a home in the Leimert Park section of South Los Angeles still did not prove easy.

First, Patsy Parker said, a private mortgage insurer--a firm that insures a lender against default when the buyer’s down payment is less than 20%--took weeks to decide whether to insure the loan. Eventually, the company refused to insure it.

No one said why, but Patsy Parker believes she knows. “We felt they were dragging their feet because of the area where we were trying to buy,” she said.

Complaints are increasing that private mortgage insurers are skittish because of the real estate slump and are turning down more business. In the case of the Parkers, the decision by the mortgage insurer would have killed the deal had her real estate agent, Wayne Pharr, not scrambled to find another firm willing to do it. Mortgage insurance was only part of the problem. The Parkers agreed to buy the home for $180,000, but an appraisal valued the home at $150,000. The low appraisal--made in May after the city’s riots--could have killed the deal.

“I couldn’t believe it. I knew that the house cost a lot more than that,” she said angrily.

Eventually, Pharr was able to get the Parkers adequate “comps”--or comparable sales in the neighborhood-to successfully show that the home was worth about $180,000. The Parkers then got the loan through American Savings.

Patsy Parker believes getting the home loan was a lot more difficult for her and her brother because they were buying in a black neighborhood than it would be for whites buying in areas where homes are of similar value.

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Ernestine Tillis, a self-employed woman in South-Central Los Angeles who runs her own day-care operation, never had a problem getting a loan to buy her home on East 67th Street. Just one with a decent interest rate.

Her home was bought back in the 1970s for $19,900, financed through one of the high-interest finance companies that have proliferated in South-Central Los Angeles as banks have left. Used to paying 13% or more, she frequently sought to refinance, only to be spurned by banks. Those who spoke with her typically would not offer to do much better than the rate she already had.

“This is a black area, which could be some of the reason the rates were so high. It was very unfair. You try to live your life like everyone else, but everything is always so far out of reach,” she said.

Eventually, Fred Thomas, a mortgage broker in South-Central, was able to arrange a refinancing with mortgage banking giant Countrywide Funding in Pasadena at a rate of 6%. Tillis also was able to tap her equity to pay off some consumer debt she had accumulated.

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Alex Linton and his wife were so confident that they would be able to buy the three-bedroom, $150,000 home they found on West 111th Street in South-Central that they put a couch, wall unit and bed on layaway at a store.

Linton bought a sink he planned to install in one of the bathrooms when he remodeled it. His two children, ages 2 and 4, were excited to be moving from the home they rent in Gardena into a house of their own.

Working a day job as a field mechanic for the gas company and a night job at Los Angeles International Airport sorting packages for Federal Express enabled Alex Linton to earn $47,000 last year and save $17,000 to use toward the down payment and fees. His wife, who is not applying for the loan because of a past credit problem, earns about $25,000 as an insurance claims investigator. On top of it, he says, he was going to get a $3,000 credit from the seller, a company that had foreclosed on the previous owner.

But this month, Linton was rejected for a loan by Bank of America, which had been on the verge of granting him a loan under a special program for low-income and minority customers even though he had a few credit problems in 1990 and he was putting 5% down. The bank, he was told, was unable to get private mortgage insurance that lenders use to protect themselves against losses when a buyer’s down payment is less than 20% of the purchase price.

In addition, Linton and his real estate broker, Keith Donahue, said they were told that the source of Linton’s down payment was not clear to the bank, reflecting a common fear by lenders that down payments may be borrowed. But Linton and Donahue say the money merely came from Linton’s payroll checks--which can be proved by check stubs--that he kept in drawers at home because he is wary of saving his money in a bank.

The sale fell through a little more than a week ago, although Linton has been told that he can still buy the home if he gets his loan approved before someone else makes an offer.

“It’s very frustrating. My heart is fluttering over all of this,” Linton said.

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Alice Baxter, an in-home nurse, and her husband, David, a truck driver for the city of Los Angeles, had been renting and wanted to buy a Spanish-style home on 111th Street in South-Central.

The Baxters had saved enough to put down as much as $20,000. Still, buying the home was not easy.

Lenders who were contacted offered to structure a loan in which payments would be about $1,200 to $1,300, much higher than they wanted. What is more, they discovered previously unknown “credit problems” that one lender declared would disqualify them from getting a loan.

The first was a 9-year-old doctor’s bill for $46 that they say they did not realize they still owed. Once they tracked it down, they paid it off. “We wondered why would they hold something against us for $46,” Alice Baxter said.

The second had been from a department store that had charged them payments in 1983 for an extended warranty on a record player. They contend they did not even want the warranty. Still, they paid it off after late notices arrived.

As with Tillis, mortgage broker Fred Thomas in South-Central put together a deal using Countrywide in which the Baxters put $19,500 down, or nearly 25% of the $80,000 purchase price on the small home. Their payments are now a comfortable $509 a month.

Thomas said the Baxters are an example of the kind of good customer in South-Central Los Angeles that is invisible to many bankers. He said that even though banks announce large problems targeting low-income areas, the lack of branches in the area and the centralized loan-making functions make it hard for them to reach people like the Baxters.

“You can come up with all of the programs you want to, but unless you have people getting out there it won’t happen,” he said.