State Panel Considers Low-Interest Loans

A state panel today will consider Los Angeles’ request to issue about $16 million in bonds to provide low-interest loans to investors who want to buy and refurbish four quake-wrecked apartment buildings in the San Fernando Valley.

The proposed projects together would make available 467 units of housing in Northridge and Tarzana.

The buildings in Northridge that have tentatively been selected to receive the loans are a 136-unit complex at 17819 Merridy St., a 78-apartment property at 18550 Citronia St. and a 60-unit apartment at 8757 Canby Ave. A 193-unit apartment at 18601 Hatteras St. in Tarzana is also on the preliminary list.

The California Debt Allocation Committee, which regulates local governments’ bond-issuing activities, is expected to approve Los Angeles’ application, said David Perel, a housing finance officer with the city. “It’s the highest priority for the bond authority.”

The program is designed to help people who want to buy and fix up quake-damaged apartments by making available loans with a variable interest rate capped at 7.5%. The fixed mortgage rate that banks currently charge ranges from about 9.5% to 10.5%.

Groups of investors that are poised to add a new partner who would have a 51% or greater stake in the property would also be eligible for loans from the program. The new partnerships could use the money to refinance an existing mortgage and to cover reconstruction costs.

On Tuesday, the Los Angeles City Council approved the city housing department’s request to submit its application to the state.

What makes the low-interest loans possible is the low-yield rate of the bonds, about 3.5% to 5.5%. Interest earnings on the bonds are tax-exempt, however, giving investors a powerful incentive to buy them. The bonds are guaranteed by the Federal National Mortgage Assn.

Perel said that the city will try to expand the program in the future, to raise a total of $50 million to $60 million.