Fertile Fields for Buyers

After John Tunis’ rental home split in half during the 1994 Northridge earthquake, he had 48 hours to move his family of five into another home.

“I rented a place from a slumlord,” Tunis said, recalling how he and scores of others in the devastated Ventura County town of Fillmore scrambled for scarce rental housing. “I talked him down from $1,100 to $1,050 because it was such a dump.”

The family’s forced move marked a low point for Tunis, 41, an electrician who had previously suffered a work injury, landed temporarily on welfare and filed for bankruptcy. “I was very unhappy,” he said.

But life turned around for Tunis in June 1996, when he became the owner of a three-bedroom home in Fillmore. Built in 1915, the house has a wide front porch, beveled glass in the front door and built-in china cabinets.

And best of all, the $130,000 selling price gave him mortgage payments of less than $1,200.

“This is the best thing that’s happened to me in a long time,” said Tunis, who had worked hard but was “never, never able to save a penny” for a down payment on a house.

Tunis’ break came when Maria Gonzales, an agent with Premier Realty Sales in Ventura, telephoned him as part of her “cold call” program to drum up business.

She had discovered a little-known loan for rural areas, guaranteed by the federal government, that requires no down payment and she was looking for people who wanted to buy homes. “I started calling everyone in the phone book,” said Gonzales, whose sales territory includes part of Fillmore.

When Tunis told her how much he was paying in rent, Gonzales replied, “You could be paying on a mortgage for about $100 a month more.” After satisfying a handful of requirements, Tunis qualified for a guaranteed rural housing loan and was in a home of his own.

“John didn’t believe me when I told him the loan was approved,” said Lucy Garcia, a senior loan officer with National Pacific Mortgage in Oxnard. “He’s a happy camper.”

Long known as “farmers home loans,” the guaranteed rural housing loans are administered by the U.S. Department of Agriculture. Last year, 791 California families bought homes through the rural loan program, which guaranteed $76 million in loans for houses in approved rural areas. This year, the amount has been increased to $112 million.

Created five years ago, the mortgage program differs from the “direct loan” program that was started in the 1930s to serve low-income buyers and that carried a nightmare load of restrictions (among them: no cathedral ceilings, no garbage disposals). Today these loans have nearly been eliminated.

Under the new program, private lenders make the loans, with the government guaranteeing them.

According to Annette Joyer of the Agriculture Department’s rural development office in Sacramento, the “current Congress likes that the private sector is funding the loans.”

Surprisingly, some of the so-called rural areas that qualify for these loans are in Southern California.

There are eligible areas in Los Angeles, Orange, Riverside, San Bernardino, Ventura, Santa Barbara and San Diego counties.

According to Garcia, farmer’s home loans are sometimes the last resort for potential buyers who can’t qualify for any other loans, usually for lack of cash.

Although the program can transform low- and moderate-income renters into first-time buyers, it is not easy.

“These loans take a lot of work. The underwriter has to see everything--letters, proof, letters, proof,” said Garcia, referring to statements concerning when payments were made and the reason for any late payments. “You have to pull everything together. But these people need extra help. They all have situations.”

Tony Evans, a San Luis Obispo-based loan agent for Grand Capitol, which makes more guaranteed rural loans in the state than any other broker, agreed:

“You can help people who can’t help themselves. This is the greatest program the government has ever offered to low- and medium-income home buyers. We get people into homes for $200.”

The drawbacks of the program are restrictions and red tape.

For instance, the sale price can be no more than $101,250 to $155,250, depending on the county. Also, houses bought under this program must meet energy conservation regulations. For houses built more than 10 years ago, that can mean adding insulation to the walls or ceiling or installing double-paned windows.

Because of all the requirements, some mortgage brokerages don’t want to get involved. “There are very few lenders involved,” said Evans, who has done hundreds of rural home loans in San Luis Obispo and Kern counties. “And Realtors don’t understand the program, so they bad-mouth it.”

According to the Agriculture Department’s Joyer in Sacramento, the realty agents mistake the 5-year-old program for the burdensome direct loans of the past. “I battle this every day,” she said.

A bigger problem, countered real estate agent Gonzales, is that listing agents may be reluctant to involve their sellers in a loan program that might require them to lower the price, pay closing costs or make repairs to qualify the house.

Another former renter who became a homeowner through a rural home loan is Trina Thompson, a 24-year-old single mother who had been living with her parents in Riverside.

Initially, Thompson was not even considering buying her own home. But the situation was tense at Thompson’s parents’ house, where their dogs weren’t getting along with her dogs, and Thompson’s mother urged her to inquire about a $62,000 house advertised in Perris, about 30 miles away.

“We thought, what kind of a house is that?” Thompson recalled. But she decided to check, if only to convince her mother that buying a home was no more than a dream.

Calling to find out about the house, Thompson met real estate agent Jennie Colmer with Why USA-Westgate Realty in Riverside, who became determined to help Thompson buy a home.

Eventually, Colmer found Thompson a two-bedroom cottage for $58,000 that was advertised as a “doll house.”

Although Thompson had worked three years for a Redlands software company and had decent credit, she did not have money for a down payment, much less for closing costs, and one type of loan after another was unworkable. After the 30-day escrow period for the sale had come and gone, the sellers gave her 48 hours to come up with a loan. Colmer called loan broker Wayne Scagnetti of North American Mortgage Co. in Rancho Cucamonga.

“Wayne convinced the sellers to wait,” Thompson said. “He was a big help. My credit wasn’t perfect, and that was a bit of a problem.” But with Scagnetti’s counsel, Thompson was able to adequately explain a few late payments.

Two weeks later, after approval of a rural loan, the house was Thompson’s. As part of the deal, the sellers reimbursed her for the appraisal she’d paid for, the credit report and even the $100 deposit.

Today, Thompson and her 18-month-old son, Matthew, have a home of their own with a tree-shaded yard for the dogs, a covered brick patio, new paint and carpets and a tile roof. All for a mortgage payment of $539 a month.

“It’s fun to create miracles, as I call it,” said Scagnetti, who admits that although he doesn’t make much money on the rural loans, he does end up with happy clients and, more important, happy real estate agents who will bring more lucrative business his way.

“If we don’t help some of these people on the borderline, they’re not going to buy,” Scagnetti said.

Said Thompson: “To be honest, I never thought it was possible for me to buy a house.”