Bruce Marks doesn’t bother being diplomatic. A campaigner on behalf of homeowners facing foreclosure, he was on the phone one day in March to a loan executive at Bank of America Corp.
“I’m tired of borrowers being screwed!” Mr. Marks yelled into the phone. “You’re incompetent!” Before hanging up, he threatened to call bank CEO Kenneth Lewis at home to complain about the loan executive.
Mr. Marks’s nonprofit organization, Neighborhood Assistance Corp. of America, has emerged as one of the loudest scourges of the banking industry in the post-bubble economy. It salts its Web site with photos of executives it accuses of standing in the way of helping homeowners — emblazoning “Predator” across their photos, picturing their homes and sometimes including home phone numbers. In February, NACA, as it’s called, protested at the home of a mortgage investor by scattering furniture on his lawn, to give him a taste of what it feels like to be evicted.
In the 1990s, Mr. Marks leaked details of a banker’s divorce to the press and organized a protest at the school of another banker’s child. He says he would use such tactics again. “We have to terrorize these bankers,” Mr. Marks says.
Though some bankers privately deplore his tactics, Mr. Marks is a growing influence in the lending industry and the effort to curb foreclosures. NACA has signed agreements with the four largest U.S. mortgage lenders — Bank of America, Wells Fargo & Co., J.P. Morgan Chase & Co. and Citigroup Inc. — in which they agree to work with his counselors on a regular basis to try to arrange lower payments for struggling borrowers. NACA has made powerful political friends, such as House majority whip James Clyburn of South Carolina, and it receives federal money to counsel homeowners.
Some 1.7 million U.S. households will lose their homes in foreclosure this year, according to a forecast by Moody’s Economy.com, versus under 500,000 a year early in the housing boom. Banks want to show they’re making every effort to keep people in their homes. That can mean working with housing-advocacy groups that routinely bash the industry, increasing the clout of such nonprofits. Less certain is whether these groups can translate their new leverage into long-term influence over how mortgage lenders treat customers.
“We have the opportunity to change how lending gets done in this country,” says Mr. Marks, whose group is itself a mortgage broker and has 40 offices staffed with housing counselors. He favors a return to more traditional standards, with full documentation of income and the same fixed interest rate for everyone.
Instead of relying on credit scores, he thinks lenders should look into the reasons for any late payments in prospective borrowers’ past and prepare renters for the responsibilities of home ownership. Then, if people are given a loan they can afford, they shouldn’t be required to make a down payment, he argues.
Critics doubt some of these changes would be helpful. Having to use a single interest rate for all would make banks less likely to lend to people with blemished credit records, says Richard Riese, an executive at the American Bankers Association.
A single rate also could lead to higher rates for everyone, adds John Courson, chief executive of another trade group, the Mortgage Bankers Association.
Mr. Courson declined to comment on Mr. Marks. “You’re not going to drag me in there,” he said.
NACA seeks to limit mortgage payments to whatever a borrower can afford, and doesn’t favor stretching out payment periods. That contrasts with a loan-modification plan pushed by the Obama administration, which aims to limit payments to 31% of income.
NACA says it arranged $367 million of mortgages last year. Those borrowers must become members of NACA, agreeing to participate in its protests or help out at its offices, and for several years must contribute to a fund for homeowners who fall behind because of sickness or job loss. All NACA members pay the same interest rate, currently 4.375%.
Mr. Marks says 3.67% of loans NACA originated were 90 days or more overdue as of March 31. The industry average was 3.49%, according to LPS Applied Analytics, a data firm. According to Mr. Marks, 0.68% of the NACA loans were in foreclosure. The industry average was 2.45%, says LPS.
Some lenders have refused to sign contracts to work with NACA, among them HSBC Holdings, Barclays and Credit Suisse Group. All declined to comment. Mr. Marks says some banks that won’t sign agreements do negotiate individual cases with NACA. Even so, NACA sometimes pictures their executives and the executives’ homes on its Web site.
It recently added a photo of William Gross of Pacific Investment Management Co., the big bond house known as Pimco, along with pictures of his home and other information. Mr. Marks says his contacts in banking and government tell him Pimco doesn’t support the administration’s push to modify mortgages. “We’re exposing them,” Mr. Marks says. A spokesman for Pimco said neither it nor Mr. Gross would comment.
Mr. Marks says financial executives should be held personally responsible for actions that affect people’s lives, and “if they interpret that as intimidation, so be it.” He says that “we’re not talking about violence. We don’t do violence.”
“I have a difference with Bank of America. I have a substantial amount of assets with them,” Mr. Frey says. “We take them to court. This is how we do it in this country….It’s a civilized society.” The response from NACA, he adds, “is a mob showing up at someone’s house to intimidate them to drop this suit. At what point do people say, ‘This is starting to be uncomfortable’?”
“It should be uncomfortable,” says Mr. Marks. “You win a campaign by being relentless. Everybody has a breaking point….At some point they say, ‘How do I get these crazies off my back?’ “
Bank of America says home loans originated by NACA “are equal to and in some cases are performing better than our prime book of business.” A bank spokesman added, “There are few organizations that can bring a buyer to the table who has been through such extensive pre-buying counseling.”
Despite receiving taxpayer money, NACA doesn’t provide public reports on either its loan-brokerage business or its campaign to modify mortgages. Jim Campen, an economics professor emeritus at the University of Massachusetts, Boston, says he tried in the 1990s to analyze the performance of loans arranged by NACA, but Mr. Marks refused to provide data.
Mr. Marks says he feared the data would be used by another nonprofit to discredit his group. NACA does provide information to lenders that work with it, he says, but sees no duty to disclose it to the public.
“He’s been very effective in shaking money out of the banks,” says Mr. Campen, but “he’s not one to open up his records to public scrutiny.”
Those poor people who lied about their income.They deserve another chance.
I’d like to slap those self-proclaimed “victims”. Only in America can you borrow a half million dollars, never pay it back, and attack those that gave it to you. These people make me want to throw up. I have no love for the banks, but these folks are truly despicable.
If NACA really wanted to help people they would tell them NOT to buy a house right now.
I could only make it through the first 4-5 paragraphs. Then I started feeling sick.
Come on, these two groups deserve each other.
How about a 4.375% rate for NACA members!?!
I agree, the banks and this guy deserve one another.
Wow. Sweet interest rate though. So if I want 4.375% I just have to agree to stand outside and protest a bit????
From Yahoo Today, kind of goes with this thread:
Subprime is done. All the teaser rates are over, the interest rates have reset and the writing is on the wall.
But in the coming quarters, the scenario will play out with other exotic mortgages, Option ARM (pick-a-pay), Alt-A, etc. The homebuyers may have had better credit, but they had the same strategy: Get a low interest rate upfront, and then deal with the reset down the road, by either refinancing or selling the home. But, whoops, home values are way lower and the economy sucks. Plan derailed.
Zacks analyst Dirk van Dijk warns of the troubles ahead:
The vast majority of the homeowners with these ‘pick a payment’ mortgages pay only the minimum payment. When it exceeds a set level, or at a set date in the future (whichever comes first), the mortgage holder has to start paying the fully amortizing payment of the now much larger mortgage. This can cause huge jumps in the monthly payment, with increases of over 50% not uncommon.
These are the ultimate in ‘exploding mortgages.’ The number of these recasts is relatively small right now — at about $1 billion per month — but that number is set to grow dramatically over the next few years, exceeding $8 billion per month in the fall of 2011. If the equity in your house is gone and your monthly mortgage payment suddenly jumps from $2000 per month to over $3000 per month, what do you think is going to happen? How about if one or both of the people in the household has been laid off?
This is going to be a huge problem, particularly for Wells Fargo (WFC). The biggest writer of these abominations of housing finance vehicles was Golden West, which was bought by Wachovia, which was then absorbed into WFC. Unlike sub-prime mortgages, these were for the most part targeted at more upscale homeowners. The next wave of foreclosures will be in gated communities, not on the ‘wrong side of the tracks.’
He is wrong though, about Wells.
Golden West (World Savings) wrote the only decent neg-ams, with re-casting when balance reaches 125%, or 10 years out.
WaMu and Countrywide cranked it down to 110% and 115% or five years. HUGE difference.
Hey Blur, I couldn’t read it all either. It really is repulsive.
why doesn’t the govt buy all the foreclosures and rent them to all the people who deserve a home?Talk about a slumlord.
…Mr. Marks…organized a protest at the school of another banker’s child.
It’s astounding what people will do, then wrap themselves in the cloak of Victim’s Advocacy. Where are the RICO laws when you need them?
Many Wachovia (Goldenwest)Pick-A-Pay loans have prepayment penalties. Have friends that paid $9000 ppp in order to refi last year. It pays to read the fine print, which many borrowers do not do. The borrowers I’m referencing were “assured” by the loan agent that there was no prepayment penalty and signed the docs without reading.
I guess it really is true, there is no honor amongst thieves.
(hums a bar of “Money for Nothing.”)
I got 4.375% on my recent home purchase. I did have to buy some points, though.
Scumbags are nothing new. When they fail, they always resort to violence.
Travertin, someone should post up a website with his photo labeled “Child predator”
If he was doing this to anyone other than mortgage bankers, it would be a bad thing…
I’m a lawyer in private practice and we represent a ton of financial institutions. Like any large firm, when we need to, we will be as assertive as necessary to get what we want for a clinet. That this guy is very demanding of banks to get what he wants for borrowers seems fair. Banks hire people to protect the interests at all costs. Homeowners should do the same if necessary. Its a fair fight with the homeowners having some represenation.
kevin wrote:
Only in America can you borrow a half million dollars, never pay it back, and attack those that gave it to you. These people make me want to throw up. I have no love for the banks, but these folks are truly despicable.
—————
Love that quote! 🙂 How very accurate, and really gets to the heart of all our problems.
Jim,
Why would the higher LTV and longer duration make those better?
I assume it would make them worse, because the borrowers would be further underwater, and the RE cycle (if all loans were like this) would have an extended downturn, no? Doesn’t this just push the problem further down the road?
I’ve known a few borrowers who got World Savings’ neg-am loans, and they were NOT qualified borrowers (how I define “qualified” — they are able to actually pay off the loan). Marion and Herb were geniuses, and made their exit at exactly the right time. They knew exactly what they were doing, IMHO. It was easy to see, with even a minimum of due dilligence, to see that a large portion (most?) of their portfolio would default over time.
Regarding the World Savings/Wachovia portfolio:
A loan-to-value ratio of 107 percent is bad enough, but it is an average and many loans are in much worse shape. For loans in California, the average is now 120 percent, and the figure is no doubt much higher in such troubled areas as the Central Valley and the so-called Inland Empire, where nearly a third of the California loans were made. Wachovia estimated that last September the loan-to-value ratio in the Central Valley was 132 percent. Since then, the median sales price of homes in that area has fallen another 20 percent.
In all, more than 70 percent of the pick-a-pay loans are in California, Arizona or Florida, three states where prices rose the fastest during the boom and have since fallen the most. Wells says it thinks 61 percent of the loans in those three states will not be paid as required by the mortgage, in contrast to 36 percent of the loans in other states.
http://www.nytimes.com/2009/05/15/business/economy/15norris.html?_r=1&pagewanted=all
While these neg-am loans might have their place among the very wealthy (who have the cash to pay off the mortgage if necessary, but choose to invest their money elsewhere where they get a much higher return), it is totally irresponsible to offer these loans to the average mortgage borrower, IMHO.