The Los Angeles County Community Development Commission (LACDC) has developed a new program called the Housing Economic Recovery Ownership (HERO) that offers eligible applicants interest free loans for up to $75,000.  Payments for these "silent seconds" are deferred until the home is sold, refinanced, title transferred or no longer owner occupied.  In other words, you don't have to pay back the money until you sell, refinance, move out or die.

So how does one qualify for this assistance?  Well, here are some of the basic eligibility requirements: 

• Borrower(s) must be first time buyer(s) - no previous homeownership in the last three years.
• Only purchased foreclosed (REO) or abandoned properties are eligible.
• There are income guidelines but basically, you must be a low-medium income borrower(s).
• Sales prices limits are $493,000 for single family residences and $394,250 for condos/townhomes.
• Property must be located within a HERO designated census tract (total of 338 in LA County).
• Borrower(s) must contribute a minimum of 1% of the down payment, which may be a gift.
• Borrower(s) must complete a HUD approved homeownership education course.

Another caveat for this program is that the property must be purchased at a discount of 1% from the current market appraised value.  Yeah, I know what you're thinking, it's hard enough getting your full price offers accepted when there are so many other offers that are at higher than list price.

I assure you, I feel your pain because like you, so many of my own first time buyer clients are having the same problem and it is a problem because in some cases, these REO's will not appraise at the higher than list offer and in some cases, the property is back on the market in a few weeks because of insufficient appraised value. 

However, in the training session that I recently attended, the LACDC announced that Fannie Mae has already promised the LACDC to lower their REO properties to the 1% discounted price and has agreed that the property's Asset Managers and REO listing agents will be informed and educated to give priority to the LACDC applicant's offers.  In other words, regardless of how many other offers a particular Fannie Mae REO property may receive, Fannie Mae has indicated that LACDC applicants won't have to compete against higher offers.

Now, I know what you're thinking, "Yeah, I'll believe that when I see it", which is how many of us in the training session felt when we heard this too.  But the LACDC assured us that Fannie Mae was committed to the HERO program and that they were going to do whatever they could to educate the individuals and organizations that are currently servicing and/or listing their REO properties to cooperate with the LACDC and its applicants. 

The HERO loan can be utilized with a variety of first trust deeds loans including conventional and/or government mortgage loan products as well as any mortgage revenue bond (MRB) programs.  Additionally, there will be down payment assistance available for a maximum of 6% of the purchase price or $10,000, whichever is less.  Although the HERO program is now being rolled out to qualifying lenders, mortgage professionals and real estate professionals, the LACDC will not be accepting any HERO applications until March 17, 2009.  I, for one, will give the LACDC as well as Fannie Mae the benefit of the doubt that this is a program that can work and when instituted, will provide an affordable home loan option for many first time buyers here in Los Angeles County. 

Applications can only be submitted by approved lenders who have been through the HERO training from the LACDC.  For more information on the HERO program guidelines and eligibility, you can contact the LACDC at www.lacdc.org.

If you're looking to purchase your first home in the San Fernando, Santa Clarita and/or Antelope valleys, please feel free to contact me regarding eligibility requirements, available census tracts or if you just have a question.  I would love to be able to assist you with finding the most affordable loan option available to you in purchasing your first home here in Los Angeles County.