NACA stands for Neighborhood Assistance Corporation of America. The founder is Bruce Marks.
This is an non-profit and volunteer supported organization with some considerable weight. They have it by virtue of a history of some heavy corporate coercion. Google NACA and go to their website at http://www.naca.com if you want to learn more about their history. They are so popular that you may have to wait for a month just to get a date to attend an orientation. You cannot make an appointment for assistance with a loan modification without attending an orientation. You will learn at the orientation that NACA will only assist owner-occupant borrowers who own no more than one property.
I attended a Saturday orientation workshop for NACA in San Leandro on August 20th with a client friend who needs to modify his mortgages. He would like to avoid bankruptcy. But like many others, he is facing income challenges and his home is underwater, probably to the full extent of his second mortgage. He had tried to work with the bank to the extent that he became really annoyed with the ineffectual process. I thought I would offer some assistance to see if my years of experience with lending and law might be some help. After trying for a couple of month with the same results I heard about NACA and starting checking them out. I am favorably impressed.
My friend’s situation is instructive and it is like this. Bank of America is servicing both the first and the second, loans previously from Countrywide. The second has been sold to Quicken Home Loans for what could not have been very much money since it is basically unsecured with equity. In the process of trying to negotiate with the first, we tried the HAMP process. He was denied twice before we found out that Wells Fargo was the actual lender and would not consent to the modification. The bottom line is that no lender can be forced into a modification unless the borrower has a bigger hammer than we were using.
The interesting thing about NACA is that they have successfully coerced most of the major mortgage banks into cooperation with their non-profit NACA. They entered into enforceable contracts by which the banks provide funding for the non-profit in exchange for cooperating with NACA’s clients in modifications. It will be a real test to see if they will be able to make Wells Fargo move on this one. NACA only negotiates with the holders of the first. So what we’ll be able to do with the second remains to be seen.
Once the first is handled, if it is, then we will try to work on the second. If the family didn’t want to stay in the home, it might be possible to try a short sale and negotiate with the second in that scenario. However, the real point of coercion in a short sale is the potential threat that the holder of the second will become a sold out junior lienholder in the trust deed sale by the first trust deed holder. The prospect of getting nothing makes them willing to take less. That is not available when the homeowner wants to stay put. The client will have to look at the options if and when the first is modified.
Failing a short sale or if the family wants to stay in the home, there is the possibility of filing a Chapter 13 if there is enough other debt to make that worthwhile. Assuming there is, the second can be reduced to the amount of the equity, or stripped off entirely if the 2nd is completely unsecured. This is referred to as lien stripping. This is only available in a Chapter 13 bankruptcy where the debtors have to agree to repay something inside a Chapter 13 plan over a period of some years. That is the subject of another conversation.
More on that later….
Barry Mangan