Zero-Down Loan Program Aims to Expand Mortgage Access

October 15, 2018

A new effort is underway to raise the low rate of homeownership among underserved groups of home buyers. The Neighborhood Assistance Corp. of America is hosting several events across the country, helping borrowers with low credit scores to apply for 15- or 30-year mortgages with cheaper interest rates. One such recent event in Miami drew thousands looking for a chance to get a no down payment, low-interest-rate mortgage. NACA officials say more than 10,000 potential borrowers have attended various NACA events in cities such as Charlotte, N.C., and Atlanta.

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“The low rate of homeownership and number of mortgages for low- and moderate-income people, and for minority home buyers, is a national disgrace,” NACA CEO Bruce Marks told CNBC. “There have been zero foreclosures among the loans that we’ve originated in the past six years.” Bank of America is backing the NACA program with $10 billion in mortgage commitments.

Borrowers are required to go through an education session about the program, as well as counseling for budget planning to make sure they can afford a mortgage payment. They also must still submit all necessary documents, such as income statements amd phone bills. The program serves only those who are buying a primary residence, not an investment property. The loans for 15- or 30-year fixed-rate mortgages are below market, at around 4.5 percent. “That’s what’s going to help people who’ve been locked out of homeownership really become homeowners and build wealth,” Marks told CNBC.

However, critics of the program are concerned that loans with no down payment requirement could carry too much risk. Program officials say buyers have “skin in the game in a real way,” meaning it’s their home and an investment for their family. “We have seen significant wins in this partnership,” A.J. Barkley, senior vice president of consumer lending at Bank of America, told CNBC. “Just to be clear, when we get those loans with all the heavy lifting here, we’re over a 90 percent approval, meaning we actually underwrite the loans for 90 percent of the people who go through this program.”