The Neighborhood Assistance Corporation of America (NACA) has $10 billion in funding from Bank of America to make loans on its own terms over the next decade. The nonprofit does not require down payments or consult credit scores, and its loans all carry interest rates below 4 percent.
NACA Chief Executive Bruce Marks wants to show that it is possible to lend to lower-income borrowers on terms that are profitable and sustainable, in order to redeem the original concept behind the principle of subprime lending. He says low interest rates and housing prices have created an opportunity to help lower-income families buy homes on terms they can afford.
Marks is part of a growing chorus in the housing industry warning that the government's push toward safety is reviving an earlier era when homeownership was beyond the reach of too many families. New federal rules guiding loan eligibility are meant to protect consumers from biting off more they can chew, for example; but some worry that the rules are too restrictive and could choke off access to credit for many. Center for Responsible Lending President Michael Calhoun is one, noting that about 15 percent of mortgages underwritten by Self-Help Credit Union -- a lender with ties to his organization -- would not satisfy the new standards.
Still, Calhoun believes the Consumer Financial Protection Bureau is moving in the right direction. "They have done everything that they can to facilitate an expansion of credit," he says.