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.
The Conventional Approach
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’s Approach -
Reinventing Mortgage Lending
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. |
