Understanding NACA's Homeownership Model

What if I could present you with a mortgage offering no down payment, no closing costs, and no hidden fees? Add to that a fixed interest rate below the market standard — one that won’t fluctuate with the economy — and a set monthly payment (for principal and interest; though property taxes may change over time) throughout the life of your loan. Imagine I make this offer even if your credit isn’t perfect and your income is modest. Wouldn’t you be interested? Who wouldn’t? Feeling skeptical? That’s understandable, especially in light of the financial crisis that followed the 2008 housing market crash.

Alright, here's the reality: I can't offer you that deal, but a non-profit organization called the Neighborhood Assistance Corporation of America (NACA) can, and they do — helping thousands of Americans each year. Founded by CEO Bruce Marks in 1998, NACA first gained attention for its bold, direct approach in confronting the predatory lending practices of large banks. For instance, in 1999, former Sen. Phil Gramm called Marks an 'extortionist' on the Senate floor because of his uncompromising efforts [source: Appelbaum]. Since then, NACA has made waves with its own lending policies. They assist borrowers that many banks would typically decline — individuals with minimal savings, damaged credit, significant debt, and even those at risk of foreclosure. While the organization mainly serves low to moderate-income individuals, anyone can participate, regardless of income.

While major banks often view lending to low- and moderate-income borrowers as a risky venture, NACA sees it differently. Marks and his team believe it’s an investment in the future. Their approach involves offering borrowers favorable rates and educating them on homeownership, which ultimately leads to more stable neighborhoods as residents invest in their communities. NACA isn’t just about providing mortgages — it also serves as a community advocacy program that empowers neighborhoods to push for political and social change. Marks, known for his tenacity and determination, has been described as a 'junkyard dog' who never lets go, particularly when it comes to confronting lenders and financial institutions that exploit vulnerable borrowers with unaffordable subprime loans [source: Swidey]. Subprime loans are typically given to higher-risk borrowers and come with higher interest rates than prime loans.

NACA Program Membership and Requirements

In September 2014, 1,880 people lined up outside Apple's flagship Fifth Avenue store to get the latest iPhone. That’s a sizable crowd, right? But on the final day of NACA’s first foreclosure-prevention event in 2008, more than four times that number — 8,000 people — waited to attend the group’s free workshops and individual counseling sessions [sources: Little, Rothacker]. Before you can become a NACA member and access its services, which are free with membership, attending an introductory workshop is mandatory.

There are three membership categories within NACA. Those who are in the process of buying a home or considering refinancing with NACA are known as participating members. These members have two options for home purchases:

Participating members can take advantage of either NACA's Home Purchase Program, which offers affordable loans to help buy a home, or NACA's Home Save Program, which provides restructured mortgage solutions to prevent homeowners from defaulting on their existing loans.

Members who have purchased or refinanced a home through NACA are referred to as homeowner members. These members receive ongoing counseling and support for the duration of their NACA loan. They are part of the Membership Assistance Program (MAP), a post-purchase service that provides counseling and short-term assistance (up to three months) in the event of a financial emergency.

Finally, there are community members. These NACA members support the organization’s mission and take part in advocacy efforts. They may or may not own a home or use NACA’s services to finance their property.

All services offered by NACA, including counseling, processing, post-purchase assistance, and more, are provided free of charge to members. However, membership dues are collected from those enrolled in the Purchase Program and from community members. These dues are integrated into the borrower's mortgage payments and help fund MAP, as well as cover operational and administrative costs.

To be eligible for a NACA mortgage, certain qualifications must be met. First, you cannot own any other property, so this program is not intended for vacation homes or rental properties. The property must be located in a state where NACA offers services (since NACA doesn't operate in all 50 states), and you must occupy the home for as long as you hold the mortgage. This requirement reflects NACA's belief that homeownership and occupation lead to stronger, more engaged neighborhoods. Additionally, there is a cap on the home's purchase price to ensure that NACA can prioritize helping those who need it most. Most participants are first-time homebuyers, often those who would not be able to buy a home without NACA's assistance.

In 2014, NACA introduced wealth-building home loans. These 15-year mortgages allow buyers to pay off their homes more quickly, although monthly payments are generally higher than those of a traditional 30-year NACA loan.

Lastly, NACA members are required to engage in community advocacy. All 2 million+ members are expected to participate in at least five advocacy activities each year, such as joining demonstrations, supporting NACA's mission through neighborhood outreach, or volunteering at a local NACA office.

NACA Eligibility and Loan Process

The NACA Workshop marks the beginning of a multi-month counseling and qualification process designed to prepare potential homeowners financially for owning a home. Following the workshop, members have an intake session with a NACA counselor. The process continues with the help of a NACA mortgage consultant, who supports members through an application that assesses their payment history, debt, savings, documented income, and budgeting. Counselors also perform an affordability analysis to determine the realistic home price a borrower can afford. Notably, there is no down payment required, and interest rates are guaranteed to stay under 4 percent [source Appelbaum].

However, NACA does not factor in credit scores when processing applications. While credit scores are important to many lenders, with a perfect score at 850 and a good rating above 700, NACA's focus lies elsewhere. Most Americans score between 600 and 750, but NACA members tend to have lower scores [source: Experian]. In 2009, reports indicated that 65 percent of NACA homeowners were considered high-risk borrowers with credit scores below 620, and nearly 50 percent had scores under 580 [sources: Hogberg, Lamb]. This presents a challenge for large banks, which typically approve loans only for individuals with strong credit scores. Before the 2008 housing crisis, such banks often offered subprime loans to high-risk borrowers, but after the crash, the Federal Housing Finance Agency (FHFA) introduced reforms through the Housing and Economic Recovery Act of 2008 (HERA) to curb foreclosure rates and reduce defaults.

Once members are deemed NACA-qualified, they attend a Purchase Workshop. Here, NACA counselors provide guidance on property searching, including advice on handling fixer-uppers, as well as submitting mortgage applications and accessing MAP. Members can choose to work with a NACA buyer's agent or bring in their own NACA-approved real estate agent. When the right property is located, the agent will negotiate the purchase price and the terms of the Purchase and Sale Agreement.

As part of the mortgage approval process, NACA requires approval for NACA Credit Access. This stage ensures that the member's financial situation remains stable and that they continue to meet the necessary requirements before the loan application is approved. NACA, certified by the U.S. Department of Housing and Urban Development (HUD), acts as an intermediary between the borrower and the lender [source: Andriotis].

Properties that need renovation play a crucial role in NACA's mission to stabilize neighborhoods. Through the Home and Neighborhood Development (HAND) program, NACA works alongside members to make repairs and renovations affordable, either by having the seller handle them or incorporating the costs into the mortgage.

One of the most appealing benefits of purchasing a home through NACA is the below-market interest rate, which members must lock in before finalizing their purchase. Prior to submitting the mortgage application, members can further reduce the interest rate by contributing additional funds, known as NACA Buy-Down. For every 1 percent of the mortgage paid upfront, members receive a 0.25 percent reduction in the interest rate [source: NACA]. There is no cap on this reduction — members could lower the interest rate to zero percent.

Once the mortgage details are finalized, a NACA counselor submits the application to the lender. NACA processes and underwrites the mortgages, functioning as the mortgage broker. The borrower is then responsible for securing homeowner's insurance, and it's time for closing. At closing, NACA members are accountable for escrow costs and pre-paid expenses, including pre-paid insurance.

After closing, NACA members have access to MAP’s free counseling and financial assistance for the duration of their loan. This includes support for budgeting, forbearance, and when the time comes, selling the home.

Members involved in the Home Save Process, NACA's foreclosure-prevention initiative, work with a MAP counselor to identify an affordable solution based on their financial situation. Rather than directly modifying a member's loan, NACA submits the request along with supporting documents to the lender and manages the negotiation process.

NACA's Fight Against Predatory Lending

NACA's origins are deeply rooted in advocacy. In 1988, Bruce Marks, alarmed by the inability of hotel workers to afford living in the city where they worked due to high housing costs, became involved with a hotel workers union in Boston. His mission was to persuade the union to provide a housing benefit, a struggle that ultimately led to changes in federal law. From this victory, NACA was born, initially known as the Union Neighborhood Assistance Corporation of America.

Currently, the nonprofit organization advocates for affordable housing by challenging large banks involved in predatory lending — targeting lenders who take advantage of borrowers who are unable to repay their loans. Both Marks and his group have shown an unwavering commitment to enacting change, which has included staging protests at bankers' homes and their children's schools, disrupting shareholder meetings, and circulating rumors about the alleged extramarital affairs of financial executives [source: Swidey]. NACA's philosophy? Foreclosures caused by predatory lending inflict both financial strain and social stigma on affected families, and it is essential for CEOs to grasp the impact. Known for going after lenders he views as money-hungry sharks, Marks has earned the label of "bank terrorist," with NACA taking pride in being the ultimate adversary to these financial institutions.

For instance, NACA engaged in a prolonged battle with Fleet Bank and its affiliate, Fleet Finance, over more than four years due to their connections with predatory lenders. The organization orchestrated protests to shine a national spotlight on Fleet, and during his 1993 testimony before the U.S. House and Senate Banking Committees, Marks brought along over 400 individuals who had lost their homes because of Fleet’s practices. When the Federal Reserve refused to engage with NACA members or hold hearings on predatory lending, NACA retaliated by publicly revealing the direct phone number of then-chairman Alan Greenspan.

Ultimately, NACA triumphed: Fleet agreed to commit $8.5 million to affordable lending for low- and moderate-income borrowers, contribute $140 million to NACA's affordable homeownership initiative, and provide restitution to the borrowers and communities affected by their actions. Additionally, Fleet’s subsidiary, Fleet Finance, was shut down [source: NACA].

Another major public confrontation led to the invalidation of a class-action settlement with The Associates, once the largest finance company in the United States during the late '90s. The proposed settlement would have granted The Associates immunity while offering only $50 to borrowers who had lost their homes. After years of campaigning — including a marathon 14-hour negotiation — The Associates ultimately pledged $100 million to support NACA's mortgage program [source: NACA].

The advocacy group also targeted First Union CEO Edward Crutchfield in an effort to convince the bank to collaborate with NACA. Ultimately, First Union settled with NACA, agreeing to contribute $150 million to its loan program, but not before NACA organized a postcard protest: Members sent fliers and reports to Crutchfield’s neighbors, exposing the unethical practices of his bank [source: NACA].

NACA has also shifted its focus towards challenging subprime lending. The organization has teamed up with major banks to promote its affordable mortgages and to help restructure loans for individuals on the verge of losing their homes due to unfavorable deals. In 2003, Citigroup committed $3 billion to NACA’s cause, making NACA the first nonprofit mortgage broker — acting as the intermediary between borrowers and lenders [source: NACA]. By 2014, NACA secured $10 billion in funding from Bank of America, which allowed the organization to offer loans on its own terms to approximately 50,000 homeowners through 2024 [source: Appelbaum]. NACA envisions expanding its role to include brokering other types of loans and financial products, such as auto and student loans.

Bankers have come to dread Marks and his group of NACA protesters, easily recognized by their yellow shirts, who have the potential to disrupt anything from prestigious ceremonies to a peaceful evening at home. Some detractors argue that Marks targets financial institutions merely to raise funds for NACA, further accusing him of bogging down the lending process with excessive paperwork.

In the end, regardless of one's opinion on NACA's methods, the organization succeeds in securing the funding needed to offer affordable mortgages to individuals who would otherwise be unable to purchase or retain their homes.