Buffalo News (New York)

April 9, 2003 Wednesday, FINAL EDITION

Opening the Door;
A Nonprofit Group's Bargain Mortgage Loans Make Buying a Home aReality for Many Who Couldn't Otherwise Swing It

By John F. Bonfatti; News Staff Reporter

Would-be homeowners Randy and Robin Fortner had a predictableresponse when friends told them about a program that promisesmortgages with no closing costs or down payment at a below-marketrate for people who don't have perfect credit.

"We didn't believe them," said Robin Fortner, as she sat inthe living room of the Parkside Avenue home she and her husbandrecently purchased with the help of the Neighborhood AssistanceCorp. of America.

Disbelief is a common reaction when people hear about theAffordable Mortgage Program, according to the program's localdirector, John Anderson.

"When most people hear about it the first time, they thinkit's too good to be true," he said. "But if they hear somebodywho's been through it, they know it's true."

Just ask the Fortners or some of the nearly 300 other WesternNew Yorkers who have gotten mortgages through NeighborhoodAssistance Corp., a nonprofit organization that bills itself as"America's best home ownership program."

Real estate agent Joseph Tomasello, who represents someNeighborhood Assistance Corp. buyers, said that's not anexaggeration.

"I feel it's the best program available," he said. "I've hadloan officers (from banks) go and sit in on one of their meetingsto see what the process was about, and a lot say they can'tcompete with this program."

Neighborhood Assistance Corp. isn't a bank. In fact, itstarted as a Massachusetts union's revolt that targeted banks forwhat founder and Chief Executive Officer Bruce Marks calledpredatory pricing practices.

How it works

Although the program initially was designed to assistlow-income people, there are no income requirements for thosebuying in the areas deemed a priority -- Buffalo, the City andTown of Tonawanda, Kenmore, North Tonawanda, Lockport,Cheektowaga, Lackawanna, Niagara Falls and the Town ofNiagara.

The program's broader service area includes all of Chautauqua,Erie, Genesee, Monroe, Niagara and Orleans counties, but buyersthere must meet annual income limits. For a family of four, it's$42,000; for a single person, it's $29,400.

Bank of America makes the loans in Western New York. Markssaid it is the only bank that approached the group about joiningthe program.

Neighborhood Assistance Corp. mortgages are different fromconventional mortgages in several ways. First is the interestrate, which right now is at 5.125 percent. That's lower than Bankof America's going rate for a fixed 30-year mortgage, which latelast week was at 6.187 percent. A 15-year mortgage is alsoavailable.

"For me, the low interest rate was the big thing," said JohnFell, who recently went through the program to buy his home inNorth Buffalo. "I didn't have a lot of money for the closingcosts and down payment, but I could have gone through anotherdeal."

Second, borrowers do not buy mortgage insurance, whichprotects the bank in a foreclosure.

"Private mortgage insurance is a scam," Marks said. "Thelender gets paid only after he throws the homeowner out, sothere's an incentive to evict, to foreclose quickly because theywant to reduce their loss."

Instead, borrowers pay $50 a month for several years to aNeighborhood Stabilization Fund that is designed to keephomeowners in their houses. Those who run into unexpectedfinancial difficulty can request a loan from the fund byappearing before the fund's board.

Third, no down payment is required. Borrowers can finance theentire cost of their purchase. In fact, if the house needsrepairs, they can borrow beyond the purchase price, up to theamount they have prequalified for.

Fourth, would-be borrowers need not have perfect credit. Aspart of its prequalification process, participants submitexpense, income and credit reports, which then are examined in aone-on-one interview with Anderson.

For those with serious credit problems, it may take severalmonths or longer to demonstrate financial stability, buteventually those who stick with the program are prequalified.

"People go to traditional lenders and, if they're denied, it'sthe end of the story, instead of sitting down and saying, 'Theseare the things we need to work on,' " Anderson said. NeighborhoodAssistance Corp., he said, will work with people "for as long asit takes."

And finally, the bank covers most of the closing costs usuallyassociated with a mortgage. Most NACA borrowers need only come upwith roughly the first year's property tax and an additional $500to cover lawyer and house inspection fees.

Marks first went after Fleet Bank and its CEO for lendingmoney to companies that in turn issued high-interest mortgagesand second mortgages in economically depressed neighborhoods --places where Fleet itself would not make loans.

Advantages for buyers

After a four-year battle, "we won the war," said Marks. They gotcommitments for the program from Fleet, and now seven lendinginstitutions have a pool of $4.3 billion committed for themortgages.

Bank of America sees the upside, he said, citing a bankinternal report indicating that 98 percent of NeighborhoodAssistance Corp. borrowers would use Bank of America servicesagain.

"What we've been able to prove is that if you provide a primeloan to subprime borrowers -- borrowers who would be subjected tohigh rates, high fees and balloon payments -- they become a primeborrower," Marks said.

Tomasello said that while he has seen would-be buyers withpreapproval for a traditional mortgage ultimately get turned downwhen it's time to get the mortgage finalized, he has never seenthat happen with a Neighborhood Assistance Corp. client.

The program's prequalifying "gives the buyer more buyingpower, a stronger edge, because their processing is alreadydone," he said.

Anderson and Marks said the diligence at the front end of theprocess helps participants avoid foreclosure.

"The result is that 99.75 percent of all the NACA borrowersare in their homes," Marks said. "Out of 15,000 loans(nationally), virtually no one has lost their home."

The Fortners said the program was perfect for them. RandyFortner had changed professions, and the new job paidsubstantially less than the old one. They owned a home, but ithad a high mortgage rate and "it was becoming impossible to makeour payments," Robin Fortner said.

They sold the house and moved in with relatives before hearingabout the mortgage program through friends. "Even with our firstmeeting, we walked out and smiled and said: 'This can't be. Itisn't going to work.' " We were amazed," said Robin Fortner.

"It's not like the bank, where they are questioning everylittle thing that went wrong," she said. With NACA, "you just hadto show you could afford" the mortgage payment.

One of the components of being a member is to continue thespirit of advocacy that started the program. Robin Fortner saidshe's more than glad to sing the praises of the program.

"I just don't understand why other people don't do it," shesaid.

Information can be obtained at www.naca.com or by calling thelocal office at 834-6222.

e-mail: jbonfatti@buffnews.com

This article is reprinted here for non-commercial,educational, fair use purposes only.