EARTHQUAKE / THE LONG ROAD BACK : Southland Real Estate Market Jolted Into Limbo
Much of the region’s housing market turned chaotic Tuesday, as homeowners whose property was damaged by the earthquake swamped their lenders with phone calls, buyers tried to back out of previous commitments and sellers pushed to close sales in escrow.
While most of the destruction occurred in the San Fernando Valley, the impact of the quake is rippling through housing markets across the rest of Los Angeles County and other parts of Southern California.
Lenders have temporarily frozen thousands of pending loan applications until the properties can be inspected or reappraised, a move that could add weeks to escrows that were supposed to close as early as today.
In turn, buyers who want to purchase a house or homeowners who simply want to refinance their loans may face additional delays as harried appraisers and home inspectors struggle to keep up with their rising workload.
Compounding the troubles, many real estate and escrow offices remained closed due to damage caused by the quake and its aftershocks.
Many of those that were open could operate at only half-speed, largely because telephone service remained spotty in some areas and many employees either could not or would not come to work.
“I’ve got a couple of workers who have lost their homes, others who have suffered damage and one who is living in the park right now,” escrow agent Jim Potter said as he took a break from picking up the shattered glass and toppled computers at the agency he owns in Northridge.
“I just can’t see any deal being closed in the entire Valley for at least a week, and that’s going to back up the system everywhere,” he said.
Hundreds of borrowers overwhelmed the shorthanded staff at the customer service and check-processing facility of mortgage lender Countrywide Funding in Simi Valley, about 15 miles west of the quake’s epicenter.
More than half the facility’s 2,000 workers were absent Tuesday. Many were still sifting through the debris at their own homes, while others simply could not get to work because dozens of freeways and roads remained closed.
Some customers, weeping, begged for help in making their mortgage payments, while other calls came from angry sellers who demanded that the bank force now-reluctant buyers to go through with purchases that Countrywide had agreed to finance, said Jane Ivey, a Countrywide vice president.
“We’re helping our customers who need it, but we can’t force a buyer to go through with a sale if he wants to back out because of the earthquake,” Ivey said. “We’re doing everything we can to help out, but we’ve had to tell some folks that they better call a lawyer.”
Countrywide and some other major lenders have temporarily suspended funding loans in earthquake-affected areas until each property can be either reinspected or reappraised.
Great Western Bank said it will probably reinspect homes only in the hardest-hit areas.
“It might inconvenience some customers, but it’s the prudent thing to do,” said Ian Campbell, a Great Western spokesman.
But many of the same lenders have also launched special loan programs aimed at helping victims of the disaster.
Appraisers, meanwhile, are bracing for an onslaught of new work. Many were already putting in long hours to cope with the latest wave of refinancing. A flurry of quake-related work could translate into longer waits for consumers.
“Appraisals might start taking a little more time for us to put together, because we’ll have to take into account any quake-related damage to the property we’re evaluating or damage to surrounding homes,” said Dave Clarke, an appraiser in West Los Angeles.
Ironically, Clarke said, homeowners who did not suffer any damage and are simply seeking to refinance their existing loans could be among the losers in the aftermath of the quake.
Homeowners whose properties were damaged may be eligible for financial help from their lenders and government agencies, Clarke said. But homeowners seeking lower mortgage rates may be prevented from refinancing because lenders might be skittish about making loans in neighborhoods that have sustained heavy damage.
Some experts also said Tuesday that the quake could encourage many homeowners who sustained damage to simply let their lenders foreclose.
Even before the quake, property values in the San Fernando Valley were down about 20% from their peak of a few years ago. Since thousands of homeowners in the Valley and across Southern California had seen their equity wiped out long before the earthquake hit, some may see no reason to make expensive repairs.
“Some people are just going to figure that they’d be throwing good money after bad, so they’ll just mail their keys back to their bank and say, ‘It’s your problem now,’ ” Clarke said.
* BOND MARKET
The municipal bond market appears to be shrugging off the quake. D3
* IN THE DRIVER’S SEAT
Trucks manage to move products across the Southland. D3
