$1 billion private dollars to prevent foreclosure

Okay, call me a cynic, but what is Neighborhood Assistance Corporation, and what do they want?

Neighborhood Assistance Corporation of America, an 18-year-old housing advocacy group, yesterday announced it would commit $1 billion to refinancing the loans of lower-income people at risk of losing their homes.

The financing will come from CitiGroup and Bank of America, which have been lending money for years to borrowers screened by the nonprofit group. NACA, of Boston, said it had helped put 50,000 people in homes since its creation. [WaPo]

The foreclosure crisis is real. Any investment that might help low-income lenders keep their homes is money well-spent.

Still, I'd like to know what kind of organization gets a billion dollars from two major banks. More from the WaPo article:

NACA requires that people who ask for its help attend intensive housing counseling workshops. It also assesses the person's ability to own and maintain a home. It then helps the person obtain a mortgage with one of its partner lending institutions, the biggest ones being CitiGroup and Bank of America.

In 2003, Citigroup made available $3 billion in mortgage loans to NACA through 2013. Bank of America, which has worked with NACA since 1995, committed at least $6 billion through 2015.

The group traditionally found the money was best used to finance new home loans for low- and moderate-income buyers. But with the mortgage crisis unfolding, it decided that $1 billion should be used to refinance the loans of people preyed upon by abusive lenders. The group expects to refinance about 7,000 mortgages -- a small number, given estimates that more than 1 million homeowners nationwide could be at risk of foreclosure. [WaPo]

Is NACA an independent philanthropic group, or a front for the banking industry?

Update: My suspicions about NACA were misplaced. See the comments below for more details about the organization's history and mission.

Comments

[superdude]

Non-profit credit counselors steer credit card borrowers into payment plans with worse terms than they would get from a bankruptcy judge. And they'll never, ever tell the borrower whether he or she would be better off declaring bankruptcy. That's their purpose. They are non-profit organizations funded by banks. Maybe this is similar.

[Bloix]

NACA is not a "philanthropic" group and it is certainly not a shill for the banks. It is a non-profit committed to social change and social justice. It grew out of an initiative of the Boston local of the Hotel Workers Union. It is still closely allied to the union movement. It has been a major force in suing banks to stop illegal mortgage practices and it has used the very substantial damage awards and settlements it has obtained from them to fund its lending.

see http://www.naca.com/index.jsp

Also, from the bankers' perspective, see http://www.city-journal.org/html/10_1_the_trillion_dollar.html :

"There is no more important player in the CRA-inspired mortgage industry than the Boston-based Neighborhood Assistance Corporation of America... [NACA CEO] Marks, a Scarsdale native, NYU MBA, and former Federal Reserve employee, unabashedly calls himself a "bank terrorist" ... bankers so fear the tactically brilliant Marks for his ability to disrupt annual meetings and even target bank executives' homes that they often call him to make deals before they announce any plans that will put them in CRA's crosshairs... Marks's political agenda reaches far beyond finance. He wants, he says, to do whatever he can to ensure that "working people have good jobs at good wages." "

[Bloix]

PS - You're a cynic.

[SamChevre]

You're right to be cynical--you're cynicism is just mis-directed. NACA (like ACORN) is basically a group of shakedown artists; their general mode of operation is "give us money, or we will make your lives hell by filing massive numbers of regulatory complaints the next time you try to expand."

[DAS]

IIRC, groups like NACA really got their start with some sort of community banking bill ... which has, IIRC, really been a boon for the banks -- so indeed, your cynicism would be on the mark ... except the banks were too stupid and too prejudiced to recognize a business opportunity when it knocked on their door.

NACA, actually seems to be a pretty decent organization from what I can tell. Sam Chevre has their mechanism down pat -- but AFAIC, any shakedown artist who's making sure banks follow laws written that do nothing but ensure banks actually avail themselves of good business opportunities before they go and get involved in stupid mergers, is doing a rather good thing.

[mudkitty]

Superdude is right.

When they can't foreclose they'll name themselves a redevelopment organization, and start eminent domain proceedings.

[janet]

It looks like the banks are trying to pick off the better credit risks among the people who are facing foreclosure -- hence all the stuff about credit and housing counseling.

Mainstream mortgage lenders don't want you to foreclose; they want your money, not your house. If this deal works like it says it does, the predatory lenders will get some cash for a buy-out of the loans, rather than dealing with trying to sell their victims' houses, the borrower will get a new loan with better terms, and the new lender will pick up a lot of new mortgages. I don't know anything about NACA, but if it's honest about what it's doing, it is simply leverageing the self-interest of the banks to obtain deals that are better for borrowers.

[voxpop]

In a perfect world with other lenders, this might be a good thing as so described by a few ...
but ...
I think SuperDude and MudKitty called it right and it's sad but true that you are right to be cynical.

On the surface they make all of this sound so righteous. They might even have a few good names. (like a spokesmodel for their purpose, eh? (I just had to use that word(s)) spokesmodel, (it's one of my least faves)
The one thing that stuck out that said everything is the Bank of America involvment. They are ALL ABOUT getting their names on your property, (to eventually remove yours from same, of course) they have been pushing their agenda for too long and too obviously.
They are anything BUT American. But I have thought that for a long time due to long conversings with employees of same. (prob. some illegal immigrant tales there out in the wash) ...

[rapier]

The reason for NAC's existence, getting mortgages for lower income people, was rendered unnecessary by the inexorable advance of the mortgage mania and it's resultant housing bubble. By 2004 with the mortgage mania in full swing mortgage products aimed at marginal buyers proliferated and so too did the work of sucking in every possible warm body to sign on the dotted line.

At risk or writing a book. The transformation of mortgages involved the 'securitization' of them. This means bundles of mortgages were packaged and sold to 'investors'. In the past a bank would make a mortgage loan and keep the loan. Taking the monthly payment and earning their interest till the loan was paid. Of course in this case they were very carefull to make a loan to someone they thought would pay it back. Now all mortgage lenders bundle up the mortgagtes and sell them off to the GSE's, ie fannie mae etc., or thru Wall Street. The crucial part is their reward is front loaded. After they sell it off they dont care if it is ever paid off.

This whole securitization of mortgages was spearheaded by the GSE's. It is certainly not a bad thing in and of itself. It has lead to very very bad things. So bad that we will likely have the worst real estate recession since the depression and there are systematic risks for the entire financial world as much of the mortgage paper goes up in smoke.

There are two sides to every trade of course. The lenders lent, and the mortgage paper buyers bought. For the last couple of years they bought the worst sort of risky junk, believeing evidently that risk was so 20th century, or something. The blowup of much of this paper is being hidden well, for now. It is in everyones interest to hide it.

It was inevitable that the housing bubble would in the last burst would rely upon sucking in the weakest. That is how all bubble end. The late comers always end up being the biggest bagholders. The strip mall mortgage shops were set up with the intent of making a quick buck on the back of suckers.

It is important in the linked story to note thay they are not giving money away but making it available. Hardly the same thing. If they can help stressed but solvent borrowers by giving new loans at favorable terms that's great. However many many of the borrowers over the last 3 years will never be able to service their debts. Also many of these borrowers are less than victims. Knowingly or not many were raw speculators, counting on ever increasing home prices to make a killing.

As long as prices were rising there was never a problem. If you couldn't pay the payment then you sold, and maybe made a bit of profit. Now they can't sell. Or can't sell at a price which will settle their debt. What was a virtuous circle is now a vicious one. Tighter lending standards, swelling unsold inventory boosted by foreclosed properties and resultant lower prices promise years of trouble going forward.

For an alt view of the world of finance visit here
http://wallstreetexaminer.com/blogs/winter/

[Alon Levy]

Well, it's little consolation now, but the US government's been basically begging for this to happen. It's subsidized higher-end homeowners by exempting mortgage payments from taxation. It's spent the most investment money in areas where it's nearly impossible to rent, throwing money at highways instead of public transportation. And its politicians have promoted some mythical American dream about home ownership.

[TW Andrews]

Though it might be hard to believe, it's very much in the Banks' interest not to foreclose. Banks aren't in the business of real-estate speculation, and getting a house out of a non-performing loan almost certainly results in a substantial loss for them.

However, they can't simply not foreclose if someone stops making their payments for fear of creating an incentive not to pay.

The ideal thing, from the banks' point of view, is if a third party would help folks who are having a hard time making payments at the moment to stay on track. In fact, such an organization might be so helpful that it would be worth donating a significant amount of money to.

[rapier]

Banks don't want to foreclose but as I explained banks don't hold many mortgages. Most mortgages are held not as mortgages but as parts of pools of mortgages, each part being called a tranche and each part having different characteristics and different returns. The main tranche does have a direct relationship with the physical home itself and ownership reverts to them when default and foreclosure happens. Usually but not always this is the party you are sending your mortgage payment to.

In any case it is absolutely true that none of them wants to foreclose. They don't have the manpower to manage the maintenance of the empty homes for one thing. The fact is that the skyrocketing foreclosure numbers don't tell the whole story because mortgage holders are bending over backwards, and further, to avoid declaring foreclosure. You see if their books don't say foreclosure then nobody is the wiser and so their stock price won't fall. Eventually while modern accounting does allow for absurd things it doesn't allow for hiding non performing loans forever, yet. They are working on that and as some very silly legislation emerges to address this problem you will probably see efforts to allow sending these losses into outer space, figuratively.

By the way since nobody has the ability to manage these foreclosed homes most of them will for all practical purposes be abandoned. A for sale sign will go up in front and that's it. I've read stories of expesive homes with the pipes frozen and leaking for weeks till home was destroyed. Only a neighbor noticed something was wrong. .There are going to tens of thousands of these comming, some to neighborhoods near you.

[Osila Newsome]

I am having the same problem with my mortgage payment.I am affraid my mortgage company put my home in foreclosure immediately I found myself
out of job and I informed my lender. So
reading your writing or comments that banks do not want to foreclose homes is
not quite accurate in my case. I am now
more worried because I was going to ask
for refinancing by NACA. What should I do?

[David]

The foreclosure crisis is real. Any investment that might help low-income lenders keep their homes is money well-spent.

[Arthur Lomelin Sr]

Sure they do? I went to the workshop 7/2007,turned all Docs over,signed all forms,paid membership dues(twice),told everyone about this socalled Godsend;)and now I am no closer to saving my home, I worked with the Oak Ca office and after many unreturned calls and comfirmation that my file was pushed aside and others who came after me were handled quickly?? well you do the guessing at what happened.