NACA Way

Prime Loans for Subprime Borrowers

NACA is creating a new national standard for providing loans to low and moderate-income people and "subprime" borrowers. NACA provides Prime Loans with unmatched mortgage services to borrowers whom the lending establishment has traditionally saddled with exorbitant interest rates and outrageous fees.

NACA’s typical borrower may have B, C, or even D credit ratings, which result from charge-offs, collections, judgments, and/or bankruptcies. In addition, these borrowers do not have substantial savings and have often encountered personal setbacks that require tremendous efforts to overcome.

Lenders have traditionally regarded such borrowers as risky prospects for mortgage loans. As a result, they charge high rates, points and fees to offset the potential losses from loan defaults. A typical NACA borrower might be forced to pay interest rates of 14% and points and fees greater than 5% in the conventional market.

These burdensome terms make it extremely difficult for the borrowers to keep up with mortgage payments over time. By making the mortgage so unaffordable, lenders fulfill their own prophecy, often pushing borrowers into financial devastation and the loss of their homes.

NACA challenged the assumption that "subprime" borrowers were inherently more likely to default on their home mortgages. These borrowers usually have a strong commitment to making their rent payments, and NACA believed that if they were given the opportunity to own their own home, they would work even harder to keep it. Many, however, would be the first homeowners in their family, and would therefore lack the experience required to deal with the complex issues surrounding home purchase and ownership.

NACA’s breakthrough was to combine an affordable mortgage product with a free housing services program that featured extensive education and resources for the potential homeowner. This comprehensive approach has been an incredible success. Borrowers who would have never been able to obtain an affordable mortgage get the tools they need for homeownership and the long-term financial responsibility of owning a home.

NACA’s reinvention of mortgage lending has created unprecedented opportunities for lenders, communities and working people. The mortgage is better than affordable, with no down payment, no closing costs, no application fees, and a below market interest rate. This allows NACA and its lenders to tap into a large pool of potential homeowners who might never have even considered a conventional loan. Equally important, NACA’s housing services program helps people avoid the pitfalls of the purchase process and ensures that they will be able to enjoy their homes for years to come.

As part of NACA’s strategy for building an extensive relationship with each of its customers, potential homebuyers become NACA Members after their introductory workshop and are assigned personal Housing Consultants. These ongoing relationships allow NACA to carefully address each Member’s credit issues and determine a housing payment that they can comfortably afford. NACA continues to provide guidance throughout and beyond the purchase process and makes assistance and counseling available through its post-ownership programs.

This engaged approach provides real benefits to both lenders and borrowers. Over 95% of NACA’s mortgage applicants are approved for a mortgage, compared to 70 to 75% with traditional lenders. NACA’s program has been going strong for seven years with 99.75% of its homeowners living in their homes and making mortgage payments.