Finding the Funds to Fix Quake Damage : Recovery: There are a range of loan options to consider, especially for those homeowners caught in an equity bind.
For many homeowners who suffered damage from the January earthquake, money from federal and state governments and from insurance companies isn’t enough to rebuild--especially for owners who have a bigger mortgage obligation than their home is worth.
“The public funding is just not enough for many homeowners and their problems haven’t been addressed,” charged Toby Lieberman, project manager at Kosmont & Associates Inc., a real estate consulting company in Sherman Oaks. Many homeowners want to get a loan to do the needed repair work, she said, “but how do you get anyone to help you out when your mortgage is higher than what your property is worth?”
There are options out there, however:
* The city of Los Angeles administers six earthquake emergency loan programs. These programs are available as a last resort when funds available through other federal or state agencies, and from private insurance, are insufficient to repair all of a property’s earthquake damage. There’s a Single-Family Home Program that will provide loans of up to $50,000. Deferred payment loans are available to lower-income families, and in some cases the principal amount is lent with no interest; in other cases the interest rate runs as high as 7%, depending on borrower income. Another loan program for condominium owners makes available up to $35,000 at no interest, with the principal to be repaid over 30 years. Information about these loans is available by calling the Los Angeles Housing Department at (800) 994-4444.
* The Community Development Commission of Los Angeles County also has emergency repair grants of up to $4,000 available and low-interest loans with no monthly payments. These loans of up to $30,000 are due and payable only when homeowners sell or transfer their homes There are many income and use restrictions, but some funds are available to families earning as much as $58,200.
* Habitat for Humanity has raised $2 million for repairing damaged homes and building new ones in the San Fernando Valley, reported Nanci Mavar, earthquake recovery program manager for the nonprofit organization’s local offices in North Hollywood. Families earning up to the high-$20,000 range can apply for loans and grants to buy building materials. Homeowners then contribute their own “sweat equity” to help in rebuilding--along with the help of volunteers. Elderly and handicapped residents who may not be able to get out and hammer nails can contribute sweat equity by helping out Habitat in its office or even baking cookies and cooking spaghetti for the volunteers. No-interest loans of up to 20 years are available through Habitat for chimney demolition, roof repair and replacement, new windows, walls, etc. One resident in Northridge recently got a $1,700 redwood fence built by Habitat volunteers. The homeowner will pay $25 a month until the debt is satisfied. More information is available by calling Habitat at (800) 266-7047.
* The Southern California Gas Co. is making available about $5 million to Southland residents who suffered earthquake damage and need to make minor home repairs. The money is offered through the gas company in conjunction with several public agencies, including the California Department of Economic Opportunities and the California Conservation Corps. More information about the program is available by calling (800) 427-2200.
* The city of Calabasas is making available up to $35,000 per household for earthquake repair grants. The money comes from U.S. Department of Housing and Urban Development community development block grants. These funds are eventually funneled to Calabasas. To qualify for grants, homeowners must have already filed claims with any insurance carrier they may have, the SBA for disaster loans and the state’s Individual and Family Grant Program. If these various money sources fail to cover all the damage, a homeowner can apply to the city of Calabasas for a grant. Many other cities also have loan and grant programs. Culver City, for example has grants of up to $2,000 available for owners of homes damaged by the earthquake.
* Various religious organizations are offering help to earthquake victims. This includes the Jewish Federation of Los Angeles as well as Catholic, Mennonite and other groups.
* Many contractors are willing to finance the work they are doing over time, said Lynette Findlay, president of Aberdeen Management Co. Inc. in Burbank and Santa Clarita. She advised home and condo owners to try to find a local vendor who will agree to stretch out payment for construction and repair work over a period of a year or more. “A contractor couldn’t ask for better PR.”
* FHA Title 1 home-improvement loans are a good option for many borrowers who are short on equity. These government-backed loans are made through a select group of Federal Housing Administration-approved lenders. With these loans, a borrower can get up to $25,000 for acceptable home improvements, and borrowers who want less than $15,000 can get it without even getting their property appraised.
Title 1 lenders are generally in second position--that is, behind a superior first lender. Borrowers can use a Title 1 loan to mortgage their house up to 100%. With several points up front as a fee to the lender and interest rates of up to 14%, these are not cheap loans, however. It’s not as good as a conventional second mortgage, but it’s generally better than a credit card. Another limitation to keep in mind is that these FHA loans can’t be used on luxuries such as a pool or spa. More information about Title 1 loans is available by calling the FHA toll-free at (800) 733-4663.
