Founded in 1988, the Neighborhood Assistance Corporation of America (NACA) is a nonprofit, community-advocacy and home-ownership organization whose mission is to make home mortgages available to people whose incomes or credit histories would normally render them ineligible for such loans. NACA is headquartered in Boston, Massachusetts, and has branch offices in 35 additional U.S. cities.
Promoting its home-ownership program as a necessary counterbalance to “the huge subprime and predatory lending industry,” NACA rejects “the myth that high [interest] rates and fees are necessary to compensate” lenders for the credit risk they typically incur when making loans to borrowers with low incomes or poor credit histories. The organization’s mortgage program allows such people to purchase or refinance homes with no down payments, no closing costs, and no fees — at below-market interest rates. Approximately 65 percent of all applicants accepted for admittance to NACA’s home-ownership program have credit scores of less than 620, the threshold below which a loan is classified as high-risk; nearly half of the approved NACA applicants have scores below 580.
Notwithstanding these seemingly poor credentials, in 2007 participants in NACA’s home-ownership program had a 90-day loan-delinquency rate of only 1.15 percent, considerably lower than the national rate of 2.95 percent. NACA achieved these numbers (and continues to do so) by employing a lengthy and demanding application process designed to weed out irresponsible borrowers before any money changes hands. Specifically, prospective borrowers are required to complete a series of assigned tasks over a period of one to twelve months, to show how committed they will (or will not) be to making consistent and timely mortgage payments. For instance, they may be required to alter any undesirable spending and loan-repayment patterns they have developed; to demonstrate over a period of several months that they are capable of putting aside enough money to cover their future mortgage payments; to deposit $50 monthly into a fund from which they may later draw if they become delinquent on their loans; and to take part in five NACA activities (ranging from the performance of clerical duties to participation in protest demonstrations) over the course of a one-year period.
Once a prospective borrower has successfully completed whichever of the foregoing tasks NACA assigned to him, he becomes eligible to make use of NACA’s home-ownership services, free-of-charge. Those services begin with a workshop that provides the prospective home buyer with important introductory information about real estate, the housing market, and the purchase process. NACA also assigns a personal consultant to work with the borrower, from the initial mortgage application through the actual home purchase.
In stark contrast to the exacting standards it uses to eliminate unqualified borrowers from its own loan-applicant pool, NACA pressures other lenders to dispense with such precautions and to make loans even to extremely high-risk applicants, portraying as racists those lenders who prefer not to make such loans. The organization depicts the mortgage industry generally as a haven for “predatory lenders” who are guilty of “manipulative” and deceptive “schemes” that result, inevitably, in the “exploitation of working people.” NACA founder Bruce Marks puts it this way: “We believe all banks are evil — out to maximize profits at the expense of working people.”
To rectify this alleged state of affairs, Marks — a self-described “banking terrorist” — and his organization aggressively “challeng[e] the heavyweights of the predatory lending industry” with a diverse arsenal of highly confrontational tactics. As the Capital Research Center reports, these tactics “typically extrac[t] self-serving concessions from banks, [and force] them to provide [NACA] with funds that it then uses to make mortgage loans to low income borrowers. NACA rolls the fees it earns servicing these loans back into its campaign of bullying banks.”
NACA first attained national prominence when it accused Fleet Financial, a giant New England bank with more than 1,500 branches and 59,000 employees, of “redlining” — the now-illegal practice whereby financial institutions once identified (with red lines marked on a map) certain geographic areas (often populated by minorities) wherein they were reluctant or unwilling to make home and commercial loans because the default rates on such loans were exceptionally high. According to NACA, the dearth of major lenders making loans in these areas paved the way for “predatory” subprime lenders to exploit the situation by offering “loan shark rates” to low-income borrowers.
Though Fleet’s involvement in redlining was minimal in comparison to that of many other banks, NACA nonetheless targeted Fleet because the latter was, at that time, in the process of purchasing the Bank of New England. This was significant because the Community Reinvestment Act (CRA), a federal law that outlawed redlining, stipulated that final approval for any bank purchase, expansion, or merger could be stalled or derailed entirely by complaints — however frivolous or unfounded — where “community groups” like NACA accused the bank of having violated the CRA. Armed with that leverage, Bruce Marks and NACA informed Fleet that they would drop the matter if the bank would simply agree to give $20 million to NACA. “Up until now you have dealt with community activists,” Marks warned Fleet. “We are urban terrorists.”
The bank, however, refused to pay the $20 million. In response, hordes of NACA activists, clad in yellow shirts, loudly and aggressively disrupted speeches, meetings, and press conferences held by Fleet officials. Further, the activists steered many alleged victims of Fleet’s unsavory lending practices toward newspaper and television reporters, who often portrayed them sympathetically in the media. Bruce Marks himself was able to land an appearance on the popular CBS television program 60 Minutes, where he told a sordid tale of Fleet’s purported transgressions to viewers nationwide. NACA’s relentless smear campaign eventually prompted Fleet CEO Terrence Murray to meet with Marks in 1995 and to pay NACA an out-of-court settlement of $350 million, of which $140 million was earmarked for NACA’s own mortgage-loan program. Moreover, Fleet pledged to create an $8 billion loan program for inner-city, low-income neighborhoods. In exchange for these concessions, NACA agreed to put a stop to its attacks on Fleet.
The foregoing example clearly illustrates NACA’s candidly enunciated activist strategy: “Pick a battle that has the power to change the nature of lending, and fight it to the finish.” The organization boasts that it “has always taken the junk-yard dog approach — once we grab on we never let go no matter how long it takes” — and that it consequently has become the “worst nightmare” of most lending institutions.
Next turning their attention to First Union Bank of North Carolina, NACA activists crashed a meeting of First Union shareholders and launched a protracted harassment campaign against the bank’s CEO, Edward Crutchfield. They inundated Crutchfield and his neighbors with thousands of postcards containing details not only of First Union’s allegedly unscrupulous practices, but also of Crutchfield’s private life — such as an allegation that he was having an extramarital affair with a subordinate. In addition, NACA sent groups of rowdy protesters to the school that Crutchfield’s child attended, on the rationale that the organization “wanted Crutchfield to understand that he had a personal impact on people’s lives by denying them credit, and thus his [and his family’s] personal life would be affected as well.” Bruce Marks defended these tactics, saying: “What you do is what you are. It’s all personal.” In May 1996 Crutchfield and First Union caved to NACA’s pressure and agreed to fund the latter’s mortgage-loan programs to the tune of $150 million.
Because of NACA’s growing reputation for no-holds-barred extremism, banks soon began to surrender to its demands without a fight. In 1995, for instance, the organization received, with minimal hassle, a $500 million commitment from the North Carolina-based Nations Bank, which actually had cultivated a reputation for trying to aid low-income communities. Similarly, in 1999 Bank of America pledged to donate $3 billion to NACA’s home-ownership program, and followed up with another $3 billion pledge in 2003. Also in 2003, NACA harassed Citigroup into a 10-year, $3 billion commitment to provide loans to moderate- and low-income borrowers screened by NACA. And in 2007 NACA successfully pressured Countrywide Bank to restructure its borrowers’ troubled loans.