December 13, 2000

$300m Mortgage Program Planned Bank Of America, Naca Target Mass. Low-Income Families

By Scott Bernard Nelson

The nation's biggest bank and one of the nation's biggest bank critics

are scheduled to cement an unlikely alliance today in Boston, announcing a $300 million mortgage program aimed at low- and moderate-income Massachusetts residents.

North Carolina-based Bank of America Corp. will provide the cash, and the Boston-based Neighborhood Assistance Corp. of America will supply the legwork. Combined, the organizations hope to get 2,500 Bay State families into homes through the program.

NACA chief executive Bruce Marks and Massachusetts Housing Court Chief Justice E. George Daher will kick off the program with an afternoon ceremony in Daher's courtroom.

"The major lending institutions have just about abandoned the lower-income communities now," Daher said. "This kind of program can't help every family move from being tenants to being homeowners, but I hope it sends a signal to the industry that more needs to be done and can be done."

The new initiative is actually an offshoot of a $3 billion deal between NACA and Bank of America that was announced last year.

The bank committed the money to NACA's nationwide lending effort, but didn't include New England since it doesn't do other business in the region. Marks said he went back to Bank of America after the program started and convinced it to allow him to earmark some of the money for the Boston area.

Marks said he was concerned that FleetBoston Financial Corp. controlled too much of the mortgage market following last year's merger of Fleet Bank and BankBoston. The combined entity made roughly $2 billion in mortgage loans in Massachusetts in 1999, or slightly less than 5 percent of the total amount loaned.

"Fleet is absolutely the dominant player in this region, and its market share will continue to rise," Marks said. "So we're bringing the biggest bank in the country in to provide some real competition."

Through the program, Bank of America will dole out $300 million in mortgage loans to low- and moderate-income Massachusetts residents buying houses in low- and moderate-income neighborhoods. NACA will screen applicants, and help those who pass muster get through the application process.

In exchange for all the application work being lifted off its shoulders, Bank of America will provide mortgages at interest rates 1 percentage point lower than the prevailing rate at the time of the loan - currently 6.5 percent on 30-year loans and 6.25 percent on 15-year loans.

Borrowers can "buy down" the interest rate even more at a cost of 1 percent of the loan amount for every 0.25 percentage points dropped. Bank of America will also waive closing costs and doesn't require a down payment.

The typical mandate that borrowers carry private mortgage insurance until they build up 20 percent equity in the home is scrapped, too. (Although borrowers do have to join NACA's Neighborhood Stabilization Fund, which costs $50 per month over the first five years of the loan and provides temporary subsidization in case of emergencies. "It's a good program," Daher said, "and a good opportunity for a lot of people."

The deal highlights a side of NACA that many don't know exists. Marks likes to call himself a "bank terrorist," and NACA is best known in Boston for clashing with police outside of bankers' meetings, shouting down speakers, and instigating class-action lawsuits.

Since a $140 million settlement with Fleet Bank six years ago, though, NACA has also done mortgage counseling and helped low-income people across the country get loans. Through the group's 21 offices, including its headquarters in a converted warehouse in Jamaica Plain, it has helped more than 10,000 families get mortgages - 2,000 of them in the Boston area.

Working with five participating lenders, including Fleet and Bank of America, NACA now manages a $4.3 billion mortgage portfolio.

But not everybody is a fan of NACA's lending record. John Anderson, an independent real estate analyst in Dorchester, said many of the people who borrow through NACA "aren't ready to be homeowners yet," which he said contributes to foreclosures that do more damage than good in low-income neighborhoods.

When the housing market inevitably softens at some point, Anderson predicted, the fallout from NACA loans could be severe. He said other low-income lending programs, such as one by the Massachusetts Affordable Housing Alliance, are better managed.

Marks, though, is unapologetic. Six years into the organization's lending efforts, he said virtually all of NACA's borrowers still live in their homes.

"There is a patronizing attitude out there that suggests others know best what is good for working people," Marks said. "We don't buy it, and this latest program is one more way to help people help themselves."

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