A fifteen year mortgage loan with no down payment, no closing costs, no mortgage insurance, a fixed interest rate of 2.5% (that can be bought down), and borrowers that are less than three years out from a short sale - sounds unbelievable doesn't it? The Neighborhood Assistance Corporation of 
America ("NACA") has teamed up with Bank of America ("BofA") and Citibank to provide such loans to home buyers according to a report in The Pueblo Chieftain that was brought to the forefront by National Mortgage Professional Magazine. The loan product was originally developed by American Enterprise Institute and is referred to as a "wealth-building loan".
NACA is a non-profit corporation that was founded in 1988 in Boston. The NACA website describes NACA as, "a non-profit, community advocacy and homeownership organization. NACA’s primary goal is to build strong, healthy neighborhoods in urban and rural areas nationwide through affordable homeownership".
In a search of the internet for NACA there were a number of derogatory comments about the service that the company provides. Numerous complaints about a lack of communication and unfulfilled promises. The Pueblo Chieftain, however describes a very happy couple who were able to procure a "wealth-building loan" less than three years after they went through a short sale, and were able to use their down payment funds to buy their interest rate down to 0.5%.
With the loan term set at fifteen years, borrowers are able to pay down their mortgage loans more quickly than a loan with a term of thirty years. NACA claims that in a little more than three years, borrowers who take out wealth-building loans will have over 20% equity in their property even though they did not put ANY money down. This statement does assume that housing prices remain stable, so that NACA is not factoring in any price appreciation over that period of time. I did play with some numbers on a mortgage calculator and with the rate at 0.50% and no other fees, costs or expenses, it is possible that with a fifteen year loan, the LTV could be reduced to 80% in just a month or two more than three years.
BofA and Citibank are subsidizing this loan program to fulfill their obligations under the 1977 Community Reinvestment Act. The article did not indicate how much either or both of BofA and Citibank are putting up to help fund this program.
The program is available for only 1-4 family dwellings. The borrower must occupy the property being mortgaged.
NACA offices can be located on their website. There is a membership in NACA that is required and and the program is limited to low and moderate income individuals. Check it out!
