L.A. may test loan program for troubled Pacoima homeowners [Southern California]
The Los Angeles City Council is poised to vote today on a plan to help distressed homeowners in the northeast San Fernando Valley by putting up city money for “silent second mortgages” that could encourage financial institutions to modify home loans.
The pilot program would make available $1 million from the Community Redevelopment Agency to help 20 to 30 homeowners in Pacoima and neighboring communities who are in foreclosure.
Under the plan, the city would loan as much as $75,000 to distressed borrowers, who would not have to make payments on that loan until they sold their home. The city money would go directly to lenders, which in turn would have to agree to reduce the mortgage balance to current market value — in some cases a write-down of more than $100,000. The banks and the city would get a share of any appreciation in the home’s value at the time of its sale.