Fannie Mae Offers L.A. $7 Billion in Home Loans

Federal mortgage loans totaling $7 billion--aimed at putting 75,000 Los Angeles low- and moderate-income families in homes of their own--will be made available under a new program announced Tuesday by Fannie Mae, the federal mortgage association.

The plan was unveiled at a news conference attended by Mayor Richard Riordan, U.S. Sen. Dianne Feinstein (D-Calif.) and Rep. Brad Sherman (D-Sherman Oaks).

Los Angeles is one of several cities targeted by the agency, which plans to spend $1 trillion nationwide on loans--enough to finance 1 million homes--by the end of the decade.

Under the L.A. program, to be administered by House Los Angeles, a partnership between Fannie Mae--the Federal National Mortgage Assn.--and the city, potential homeowners will be eligible for loans of up to $210,000 that are specifically designed to make it easier to qualify for a mortgage.

For example, the program will back loans that require only a 3% down payment, as well as loans that are part of lease-to-buy arrangements with nonprofit organizations such as Habitat for Humanity. Buyers could also qualify for loans on fixer-uppers that have extra money built in to pay for remodeling.

“We realize the housing market is down in L.A., but we’re here for the long haul,” said Barbara Zeidman, director of House Los Angeles. Fixing up old housing stock and helping low- to moderate-income residents buy homes “helps the city become a place that people want to live in.”

The $7-billion program announced Tuesday will also help the city redeploy as much as $100 million in funds now being lent to developers to repair earthquake-damaged apartment buildings, said city housing Director Gary Squier. Fannie Mae would help refinance the loans, and the city would get most of its money back to be used for other purposes, Squier said. A similar program set up two years ago has allowed the city to take back about $100 million.

Feinstein, on hand to endorse Riordan for another term as mayor, praised the program and the job the agency has done providing funds for earthquake repair for apartments.

Gesturing to newly repaired buildings at the site of the ceremony in Sherman Oaks, she said that the blend of low-, moderate- and middle-income residents in the buildings would keep the city vital.

“I remember coming here right after the earthquake,” she said. “I remember seeing these buildings down.”

Typically, Fannie Mae works with private lenders, agreeing to buy or guarantee loans if certain conditions are met. Some of the packages are quite specific, designed, for example, to help homeowners remodel if they need to install ramps for a disabled family member. Or, disabled buyers can go to Fannie Mae for mortgages for which Social Security or welfare is considered qualifying income for the loans.

Buyers who earn less than $60,000 per year can also apply for loans that feature tax credits of up to 20% on mortgage interest, and so-called soft second mortgages, in which a buyer borrows money to get into a house but doesn’t have to pay interest on it until the house is sold.

The earlier program begun two years ago provided mortgages for 30,000 families.