An earlier version of this article was published on

[Note: While writing this post, I found something that surprised me. See below.]

The reaction on Twitter was swift and negative to this headline on, “Thousands line up for zero-down-payment, subprime mortgages.” Fears from the last real estate bubble were awakened just seeing the words “subprime” and “zero-down-payment” in the same sentence.

The Neighborhood Assistance Corporation of America, or NACA, which has called itself a non-profit, community advocacy, mortgage broker, and which has over 40 offices throughout the country, was having a multi-day event in Miami to promote what they call “The Best Mortgage in America,” mortgages with no down payment, no closing costs and below market interest rates. The nonprofit doesn’t use credit scores but “character-based lending criteria” according to The Real Deal.

The Bank of America committed to buying $10 billion worth of these mortgages from NACA, according to the articles. NACA can “originate” mortgages, that is, manage the mortgage application process for potential homebuyers, but NACA isn’t a bank, so they need to sell the mortgages they originate to someone and in this case that someone will be Bank of America.

Subprime, zero-down-payment mortgages are scary but in this case, they’re probably less dangerous than usual because NACA is doing a lot of handholding of the potential homebuyers. To qualify for one of their mortgages a homebuyer has to attend a homebuyer class and meet one-on-one with a NACA housing counselor. Perhaps most importantly, none of these mortgages are going to investors.

According to the article, Bruce Marks, the CEO of NACA said, “In the loans that we’ve originated in the past 6 years, zero foreclosures.” I wonder, however, what the foreclosure rate was on the loans they originated before the real estate bust.

Bank of America pays NACA a $3,000 commission on every mortgage. In addition, according to the NACA website, if NACA refers you to a real estate agent and you use that agent when you buy a home, your agent will likely pay NACA a referral fee of 33% of the agent’s real estate commission.

The Unexpected Twist

While on their website, I was surprised to find these mortgages benefit NACA in another big way that wasn’t mentioned in the articles above.

To get one of their mortgages you have to become a member of NACA and according to their website’s “Qualification Workbook,” you have to pledge to participate with NACA in community outreach and advocacy campaigns. Here’s part of the pledge; “I will participate in at least five actions and activities a year, such as neighborhood outreach, distributing information about NACA, informing people about NACA’s Purchase and Home Save programs, participating in rallies, demonstrations and providing public education, or in whatever way I feel comfortable in support of NACA’s mission. Participation begins from the time I begin the NACA process and for as long as I have the home NACA had helped me purchase or save.”

I did NOT expect that! I don’t know what to make of that.

I wonder if one part of their “character-based lending criteria” might be a strong willingness to advocate publicly for NACA.

Is Bank of America financing mortgages or “outreach and advocacy” for NACA? Apparently, both.

Is the program primarily a homeownership tool or a recruiting tool and member benefit for NACA members?

I don’t understand why Bank of America couldn’t run a similar but larger mortgage program themselves without an advocacy obligation.

Anyway, keep the NACA membership pledge in mind when you hear about NACA protests. Participating in protests might have been part of the deal when they took that amazing Bank of America mortgage through NACA.

The economics of the NACA business model are absolutely fascinating!

NACA Response

I reached out by email to the NACA National Media Coordinator, Tim Trumble, and asked about requiring members to pledge to participate with NACA in community outreach and advocacy campaigns five times a year.

NACA, he wrote, is a non-profit and so it relies on volunteers to get a lot of things done like any other non-profit and they encourage interested members to participate in their advocacy efforts but they never require anyone to do anything they are uncomfortable with. “Participating in any actions such as our Wells Fargo protests this past Monday is certainly very welcome, but getting ten people to register to vote (as long as they are legally eligible of course) is considered an advocacy action,” wrote Trumble. “Outreach for example, is simply spreading the word about the NACA program so we can help as many people as possible. Whether it’s getting people to come to our Home Buyer Workshops or finding a new venue for the workshops can count. Helping out with registration and crowd control at any of our local workshops or Achieve the Dream events counts. Even simply coming into our local office and helping out with basic chores can count toward the commitment. In short, it’s simply a commitment to give back to the organization that is making affordable homeownership possible for them in whatever way they are best suited and most comfortable.”

NACA in the Media

2017 Charlotte Observer: NACA Protest at Wells Fargo Annual Meeting
2009 ABC News Nightline: NACA Profile
2009 CBS Evening News: Bruce Marks Profile