Fannie Mae Plans $6-Billion, 5-Year Program for O.C.
The nation’s largest provider of mortgage money is expected today to announce a $6-billion, five-year plan to help up to 60,000 low- and moderate-income families buy homes in Orange County, the most expensive housing market in the Southland.
The House Orange County program is backed by the Federal National Mortgage Assn., or Fannie Mae, and is the largest-ever effort to address the county’s growing housing-affordability problem.
Fannie Mae has funded similar programs statewide in recent years, including $16 billion for several Bay Area counties in June, and $7 billion for Los Angeles in 1997.
Housing experts said the Orange County plan could play a significant role in helping tens of thousands of families overcome the financing barriers to homeownership. On average, an additional 12,000 families a year would qualify for loans of up to $240,000 that they might not have obtained otherwise. In 1998, that number would have boosted sales during a record year by 22%, and in 1997, the second-strongest year of the decade, by 30%.
But with a chronic shortage of affordable housing in Orange County and throughout Southern California, it is unclear whether qualifying more potential buyers for loans would actually increase sales.
The program, designed for individuals and families whose annual household income ranges from about $40,000 to $68,500, will allow lenders to be more flexible in determining an applicant’s credit-worthiness. Lenders will be able to offer zero-down-payment loans, allow employers to cover part of a worker’s down payment, and give commuters from the Inland Empire higher priority if they are willing to move into a home within walking distance of work.
In addition, employees will be able to have mortgage payments deducted from their paychecks.
“Lenders now have been given more tools and more firepower to help people get into homes,” said one business executive who was briefed on the program, but asked not to be named. “More people than ever before will have access to financing.”
The announcement will come only weeks after the federal government unveiled one of the most ambitious programs ever to house low- and moderate-income families through Fannie Mae and Federal Home Loan Mortgage Corp., better known as Freddie Mac.
Under that plan, known as Affordable Housing Goals, the two companies would raise the number of mortgages used for buying homes and building apartments to 50% of its portfolio from 42%, costing $480 billion. More than $34 billion would be spent in the Southland’s five counties.
Fannie Mae and Freddie Mac are quasi-governmental agencies that buy mortgages of up to $240,000 from traditional lenders and package and sell them to the so-called secondary markets. The two agencies set lending guidelines to which banks strictly adhere.
Though the announcement will bring some relief, Orange County’s housing problems remain far from solved. Prices have soared in the last year to a record median of $238,000, meaning that half the homes in the county sold for more, half for less. That price is out of reach for two out of every three Orange County families.
The root of the county’s housing problem lies in its booming economy, which has created far more jobs than housing in the last five years. A study earlier this year by Meyers Group, an Irvine real estate research firm, found that four new jobs were created in the county for every new home built, a rate that is more than twice the national average.
