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Condo Crash : Low financing and an idyllic location lured buyers to an Azusa redevelopment project that turned out to be riddled with problems. Many lost their money and their dreams.

November 01, 1987|MIKE WARD | Times Staff Writer

Retty Crocchi, a 57-year-old teacher, said she thought the price of $170,000 was high when she bought her condominium at the Rainbow Angling Club in Asuza five years ago, but she fell in love with the idyllic location: a secluded setting in woods beside a lake.

Her misgivings about the price were overcome by a mortgage loan well below the going rate because of special financing provided by the city Redevelopment Agency. And she was reassured about the value of the property by the mortgage lender's willingness to finance up to 95% of the purchase price, even though she decided to put $40,000 down.

When she and her husband moved in, she said, "we thought we were moving into a lovely, peaceful place. This was going to be the good life."

But their peace of mind was soon shattered. The air conditioning system broke, and the company that installed it would not honor the warranty because it the company had not been paid by the builder.

Change to Rentals

Then, after selling only 14 of the 56 units in the complex, the builder went into bankruptcy. The remaining units became rentals and, Crocchi said, she finally learned that the price she had paid for her condominium had little relationship to its worth.

Two months ago, Crocchi, now a widow, gave up on her $40,000 investment and bought a home in Santa Ana.

She had stopped making mortgage payments more than a year ago. She said she chose to lose her property through foreclosure rather than pour more money into a home that turned out to be vastly overpriced and riddled with construction defects and could not be resold. She moved when eviction seemed imminent.

Crocchi was not alone. A dozen of her neighbors also stopped making mortgage payments last year, and nearly all have moved from the complex, losing their investments, she said.

"It's been kind of a long siege for all of us," Crocchi said.

The Azusa Redevelopment Agency is gaining title to the condominiums through foreclosure.

Sold Bonds

The agency, in an effort to stimulate home construction, sold $38 million in tax-exempt bonds in 1979 to raise money for low-interest loans to home buyers in four housing developments, including the Rainbow Angling Club condominiums. City officials estimate that defaults by Rainbow Angling Club buyers will cost the agency between $1 million and $3 million, endangering its ability to meet its bond obligations and risking its credit standing.

Crocchi blames the city for luring her and other buyers into a bad investment with the discount mortgage loans and for allowing shoddy construction through failure to enforce building standards.

"It needs to be pointed out to the public," she said, "that you can come with hard-earned money and invest in what you consider to be a home that you are going to spend the rest of your life in, and the whole thing can just go down the drain.

"This is a redevelopment project that has gone sour."

City Finance Director Geoff Craig said it is not yet clear who is to blame for the blunders that went into the Rainbow Angling Club project.

"The legal people are going to have to decide who's responsible for this mess," he said.

Craig said the ingredients include:

Mortgage loans amounting to more than the property was worth.

A mistake that allowed a lapse in mortgage insurance on the loans, leaving the Redevelopment Agency without coverage when owners stopped making their mortgage payments.

A string of construction defects that became apparent after the builder went bankrupt, leaving no one to pay for repairs.

The condominiums were built on an eight-acre site that once housed a popular, picturesque dining spot called the Rainbow Angling Club. The club was nestled in the foothills above Azusa beside a tiny, man-made lake. The club stocked the lake with trout and invited patrons to catch their own dinner, providing rods and reels for those who came unequipped.

The club closed in the mid-1960s after a devastating fire. A decade later, Jack Fleming acquired the property and formed the Rainbow Angling Club Corp. to build condominiums around the restored lake.

Bank Foreclosed

"It was a beautiful project," Fleming said. "Nothing should have gone wrong."

He said many sales were in escrow when the bank that loaned money to his corporation to build the condominiums foreclosed, and contended that if he had been allowed to complete the sales, the project would have been a success.

Buyers were offered mortgage loans at an interest rate of 9.1% for 30 years through Crocker Bank, which administered funds from the Redevelopment Agency. "The 9.1% was a big attraction because in 1982, mortgage interest rates were up around 15% to 16%," Crocchi recalled.

Buyers also were given the option of putting only 5% down.

Crocchi said she and her husband decided that they would make a larger down payment because he was ill with cancer.

"We talked it over and decided that if anything happened to him, in order for me to be able to make the payments without his salary, we would have to put a big chunk down," she said.

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