People with questionable credit ratings are lining up around the block for zero down payments with the Boston-based non-profit Neighborhood Assistance Corporation of America (NACA).
Believe it or not, Bank of America backs NACA…to the tune of $10B in mortgage commitments. “It’s a total upside,” said AJ Barkley, Bank of America’s senior vice president of consumer lending. “We have seen significant wins in this partnership. Just to be clear, when we get these loans with all the heavy lifting (done by NACA), we’re over a 90% approval rate, meaning that e actually underwrite +90% loans to the people who go through this program.”
Those of us with any recollections of the housing crisis remember that zero or low down payment loans to people with iffy credit scores were one of the key factors causing this crisis 10 years ago.
So, how is this NACA zero down payment program different from what was going on 10 years ago?
BACA borrowers must commit to…
- completing NACA’s educational session
- submitting all necessary documents, from income statements to phone bills
- participating in NACA counseling sessions in order to understand monthly budgeting and to ensure the borrower can afford the monthly mortgage payment
- living in the home, not investing in the home.
Ten years ago, borrowers did not have to live in the home that was being financed. Today, NACA requires that the borrower live in the home to achieve financing in order to buy the house.
Ten years ago, borrowers did not have to provide any documentation in order to finance a loan. Today, NACA requires full documentation.
Also ten years ago, the housing market was different than it is today. Today, housing prices have risen sharply and there is a critical shortage of entry-level inventory. If a borrower gets her/himself in trouble today, she/he can sell the home quickly whereas ten years ago, there was a flood of housing and no demand.
According to Bruce Marks, CEO of NACA, “Working people (low and moderate-income people and minority homebuyers) look at their investment in homeownership as an investment for their family, for their neighborhood, for themselves.”
All NACA loans are 15 or 30-year fixed rate loans with interest rates averaging at approximately 4.5%. The program currently operates in Charlotte and Atlanta with plans to move into additional markets in the near future.