HUD Move Stirs Dream of Home Ownership

When Rosa Ramos heard on the radio during her morning commute that the Department of Housing and Urban Development will make more mortgages available to low- and moderate-income families, she began laughing in delight.

“I’ve been waiting for something like that!” Ramos, 27, said Friday of the new HUD initiative.

The single mother has been living in a Torrance apartment with her son, Carlos, 6, and she would like nothing more than to buy a small house with a backyard in a safe neighborhood.

But on her $27,000 salary as a human resources administrator, she has not been able to find anything she can afford. She’s hoping that this new federal program just might help a first-time home buyer like her. Owning a house “is something I have always wanted,” she said. “Maybe now it’ll be a reality.”

The new federal mortgage program may give thousands of Southern Californians like Ramos a better chance at achieving the American dream of home ownership. But housing experts are divided on just how much those chances have improved.

Under its Affordable Housing Goals, HUD has announced that it will require the nation’s two largest housing finance companies--commonly called Fannie Mae and Freddie Mac--to buy an additional $488.3 billion in mortgages nationwide to provide low- and moderate-income housing.

Fannie Mae and Freddie Mac are quasi-public entities that buy mortgages from lenders, package those mortgages into a pool and sell them to investors as mortgage-backed securities. When the two companies buy mortgages, they provide the lenders with cash needed to issue new mortgages.

No lending guidelines for the additional mortgages have been developed yet, and regulations may not be in place for 60 days.

California’s share of the new mortgages announced Thursday will amount to $84 billion, with $34 billion going to the five-county Los Angeles area.

Real estate experts concede that they are flying blind with no criteria established yet for the mortgages. But some cannot contain their enthusiasm.

“If I was in the real estate business, I’d be knocking on apartment doors right now,” Woodland Hills mortgage broker Mark Johnson of Troxler and Associates said Friday.

He expects the federal requirements will prompt lenders to further loosen their mortgage guidelines. It may, he said, result in lenders helping end down payments or helping with closing costs.

But Ellen Michiel, executive director of the West Valley Community Development Corp., is less optimistic. She says that the new mortgage program “won’t help low-income [people]. “It will help moderate-income people.

“They use the words ‘low’ and ‘moderate,’ but what it really means is moderate income. It’s wrong for [HUD] to say they are doing something for poor people.”

Other experts disagree.

“This initiative is extremely significant,” said Ronald Martinez, vice president in charge of lending for Los Angeles Neighborhood Housing Services Inc., a nonprofit organization. “What we’ll probably see is a new wave of creative lending products designed to meet the needs of low- and moderate-income families.”

And Antonio Sanchez, chief lending officer at the Crenshaw district’s Family Savings Bank, said the new policy will “force Fannie and Freddie to outreach for more ‘qualified low-income loans.’ ”

Such loans are “almost 99% of our market,” he said. “Fannie and Freddie will be on their knees at our front door. The problem with that is: Where have they been?”

He expects that the new mortgage policy will allow more people “to get in the game in very low-income communities. We’re blessed because in lower economic communities, you can buy a home for $160,000 to $170,000.”

Those prices won’t be available for very long, he said, because they are going up.

“People presume that because you can qualify someone that they’ll become homeowners,” said Sanchez, a former official in Fannie Mae’s Western regional office.

“That’s a fallacy,” he said. “The truth of the matter is that an individual still needs $7,000 to $10,000 to get in. He still needs good credit. And the biggest part is you still need the collateral, the home. There are not enough homes. The housing crisis is here.”

Home prices in Ventura County may make the new mortgage policy moot there, experts say.

“In Ventura County the situation is vastly different than what you’re going to see in other places in the country,” said Barbara Macri-Ortiz, an attorney and housing specialist at Channel Counties Legal Services. “Knowing what I do about the plan, it’s not going to impact the situation for low-income residents.”

HUD did not increase its loan limit of $208,000, which officials in Ventura County say is necessary if the agency wants to increase home ownership among the county’s lower-income residents.

“This county has different housing issues than other places in the country that I don’t think this program is addressing,” said Douglas Tapking, executive director of the Ventura County Housing Authority.

Although there are still homes available in the county selling for less than $208,000, they are becoming increasingly hard to find.

Of the county’s 21 ZIP Codes, just six had median prices under that amount last month. The other 15 had medians significantly higher.

Although the cost of housing in Southern California may still keep many aspiring homeowners out of the market, “it’s really too soon to notice anything yet,” said Linda Mueller, a spokeswoman for Bank of America.

Still, Ilene J. Fischer, co-owner of North Hollywood’s Allwest Mortgage Co., called the idea of allowing more people to own homes “fabulous, but I don’t know what Fannie and Freddie have in mind.”

She said she hopes lending guidelines are not relaxed so much “that people bite off more than they can chew . . . where people might lose their houses because they take on too much debt.”

Times staff writers Annette Kondo, Coll Metcalfe, Edmund Sanders and Daryl Strickland contributed to this story.