Opening Doors for O.C.’s Low-Income Home Seekers

Ernesto Delgado, dressed in a blue plaid shirt and jeans, is standing in the corner, feeling self-conscious. Like the group of three dozen well-dressed businessmen who gathered in Westminster on a recent day, Delgado is at the Vietnamese Chamber of Commerce to see the latest hope in the struggle to overcome the housing affordability crisis: the Mobile Mortgage Center.

The 28-foot-long white Coachmen, outfitted as a loan-office-on-wheels, is the most visible in a host of new outreach programs from Southland business and nonprofit groups that are desperately trying to increase the rate of homeownership, especially in the region’s low-income neighborhoods.

After meeting with loan officials, Delgado learns he could probably qualify for an $85,000 loan, maybe a little more. “Better than nothing, right?” the 40-year-old tire installer and father of three says, forcing a smile as he stuffs the loan paper into his shirt pocket.

But not enough to free Delgado and his family from a cramped apartment in a downtrodden Pomona neighborhood.

Delgado’s plight--a hard-working employee stuck with a long commute to a low-paying job--poses the biggest threat to California’s burgeoning economy: a lack of affordable housing. Job growth is outpacing new housing construction by 3 to 1, a trend that has sent both housing prices and rents to record levels. If the trend is left unchecked, companies may be unable to attract workers and new business, which would choke off the state’s booming economy.

In Orange County, the Affordable Home Ownership Alliance plans to raise $50 million to provide low-interest loans to developers to build housing for low- to moderate- wage earners, and to lobby city councils to approve such projects. The group--whose backers include the Federal National Mortgage Assn., the Enterprise Foundation, the Orange County Business Council and the Building Industry Assn. of Orange County--was launched this year with a $1-million grant from Merrill Lynch & Co.

In Sacramento, the state Legislature is discussing a housing bond that could appear on November ballots, providing nearly $1 billion to develop less-expensive housing. The state also is requiring--for the first time in a decade--that cities plan for low-income housing as mandated by law or risk being sued in court.

And in Los Angeles, the City Council unanimously approved the formation of a 60-member task force that will outline ways to create more affordable housing that may include some sort of public-private partnership. Already, the city is providing low-interest down payments for loans to firefighters and police, and the program may be expanded to include other municipal employees.

Those efforts signify more than simply good intentions. “The economic future is dependent upon people being able to afford housing,” Los Angeles Councilman Michael Feuer said. “No business wants to come to a city where employees have no place to live.”

More bluntly, “It’s enlightened self-interest,” said Neal Richman, associate director of UCLA’s Advanced Policy Institute.

Employers competing for talent in a tight labor market find that as housing costs rise, many workers are forced to commute farther and become harder to retain. Driving longer distances spews more smog and clogs freeways. Statewide, companies lose $3.7 million per day--$962 million a year--from unproductive employees being stuck in traffic, according to the state Department of Transportation.

Soaring housing prices are “a more pressing problem than in the past,” said Rich Statuto, chief executive of St. Joseph Health Systems, which along with Catholic Healthcare West provided several hundred thousand dollars to establish an Orange County chapter of Mercy Charities Housing California. The group will create lower-cost housing for families throughout the county.

“If demand for health care service increases, affordable housing will be a problem for us and all health care providers in Orange County within the next couple of years,” Statuto said.

Companies may relocate or expand to a lower-priced area out of state, taking jobs and tax revenue with them. A parade of businesses left California earlier this decade as their costs mushroomed from the 1980s housing boom. That migration contributed to one of the longest and most severe economic downturns the Southland has ever seen.

“The lack of affordable housing is critical right now,” said Trinh LeCong, executive director of the Affordable Housing Clearinghouse, a Lake Forest advocacy group that is operating the loan mobile. “The people that get shut out are those with lower wages and with credit problems. If you fall below a certain income threshold, and most people do, then you’re out of luck. We can’t help everyone get into a home, but we can at least educate them.”

Planting the Seeds of Homeownership

Perhaps the most novel approach to the problem is the motor-home-turned-lending office, which has drawn crowds in the communities it has visited.

“I’m not aware of other programs using a [motor home] for outreach,” said Nicholas Retsinas, executive director of the Joint Center for Housing Studies at Harvard University.

Under pressure from federal lawmakers, bankers increasingly have been using community advocates as a bridge between disadvantaged residents and the capital markets to broaden their lending base, he said.

Although there has been some improvement in recent years, the disparity in homeownership between whites and nonwhites remains wide. Whites accounted for 69% of all Southern California home buyers last year, while Latinos, Asians and African Americans combined for 27.6%, according to the California Assn. of Realtors.

Launched four months ago, the loan mobile’s primary goal is planting the seeds of homeownership, especially in low-income and minority communities, in hopes of harvesting loans in the future. It is staffed by two or three multilingual loan counselors and equipped with computers that allow them to pull credit reports and process mortgage applications.

The counselors explain the importance of good credit, the benefits of homeownership and the merits of a mortgage they offer that requires no money down and no monthly insurance payment. Most borrowers lack savings for a down payment, and many have minor credit blemishes.

The mortgages that the loan mobile offers come from a $40-million fund provided by Merrill Lynch. The money is earmarked for borrowers who earn as much as $72,000 in Los Angeles County and as much as $95,000 in Orange County, and who have not owned a home for at least three years.

The loans allow a borrower to devote as much as 50% of household income to the monthly mortgage payment, rather than the 38% allowed by most lenders. Interest rates run about one-quarter point higher than traditional loans, but without monthly mortgage insurance, the payment is lower.

At least once a week, the loan mobile is wheeled to busy public places such as churches, shopping malls, street fairs or workplaces. At a recent event in a poor Santa Ana neighborhood, not one applicant emerged. But those who walked through received books on home buying in Spanish and free credit reports.

At a battered women’s shelter, two out of 20 women applied for a mortgage, while others learned about credit.

At a Westminster shopping center that caters to the largest Vietnamese population outside of the tiny Southeast Asian country, new immigrant families lined up a dozen deep, waiting more than half an hour to hear about homeownership.

Less than three hours later, every single brochure and work sheet on the mortgage program--more than 80 in all--was taken, and there were requests for more. Few of the visitors, if any, earned enough to afford an Orange County home.

“Some of the things we’re doing won’t develop into dollars right away,” said Manny Sandoval, who analyzes loan applications for the Affordable Housing Clearinghouse. “But I pray we’ll be one of the institutions that have helped these people so that in the next one to three years, they’ll be in a property.”

So far, 126 loans averaging $163,000 have been approved, and only one default has been recorded. No applicants have been approved through the loan mobile itself, but several are close to qualifying, Sandoval said.

“We think it’s working,” said Garrett Gin, who manages Merrill Lynch’s community efforts, including the $40-million mortgage program. “If we can help get people into a home, we’ll help build wealth into the communities. Even if they’re not ready for a mortgage, they’ll be on the road toward homeownership.”

‘I Wouldn’t Have Qualified’

One who made the leap is Loretta Moody, a 40-year-old single mother who has a teenage son with cystic fibrosis. Moody wanted to buy the condominium she had been renting after her landlord put the unit up for sale.

One lender wouldn’t approve a loan because Moody’s debts were $7,000 over the limit after she replaced a car that had been wrecked. But within two weeks of meeting Sandoval, Moody was approved for a $120,000 loan. Not long thereafter, she purchased a two-bedroom, two-bath condominium in Garden Grove, spending $5,000 in escrow fees and moving costs to close the deal.

Without the loan, “I wouldn’t have qualified and gotten into a home when I did,” said Moody, the executive director of Community Health Charities in Orange County. With interest rates moving up shortly after her purchase, she said, “I don’t know if I would have qualified anywhere else.”

Housing experts say that hundreds of thousands of Southland residents face the same challenge.

Ernesto Delgado wants what every other Southland resident wants. He hopes someday to join the ranks of Southland homeowners. Delgado, who works 60-hour weeks tracking inventory and installing tires at the Tire Club in Garden Grove, hoped his visit to the loan mobile would result in him qualifying for a mortgage.

He enlisted a real estate agent several years ago to help find a four-bedroom, two-bath place for around $100,000. He never heard back from the agent.

Delgado dreams of providing his wife and three children with a yard, a garden and a bedroom for each child. When visiting his brother, who bought a home in Moreno Valley, Delgado tells him, “Someday I’ll have my own.”

He doesn’t even consider Orange County, whose median home price weighed in at an all-time high of $247,000 in November. Delgado thinks he could afford a house near his brother. But his commute, already 2 1/2 hours round trip from Pomona, would be unbearable.

“I understand for what I want it will be hard to find,” he said.

His family has grown weary of stepping on cockroaches, smelling trash that’s piling up behind his building and waking to his neighbor’s music. He said his 10-year-old son saw someone get shot on a recent afternoon, which frightened the child so badly that his stomach ached days later.

On the way back from visits to his brother’s house, as they pass rows and rows of neatly planned subdivisions, his 8-year-old daughter nudges him with a question: “When are we going to move?”

“I just tell her ‘Soon,’ ” Delgado said.

But Delgado hasn’t abandoned his dream. He continues to scrimp and save. He hasn’t taken a vacation in more than three years, trading cash for his days off. So far, he has saved $8,000.

He also has enlisted another real estate agent, who has found houses for several family members. Delgado plans to scour the Pomona area--which has among the lowest housing prices in the region--again early next year in hopes of finding his first home.

“They’re excited--especially the little one,” Delgado said of his family. “She still asks me when we are going to move,” he said, hoping to provide his youngest child with her own room before summer arrives. “I think I can do it.”