Nonprofit offers low-cost mortgages for modest income Baltimore residents, including those on rent subsidies

NACA, a nonprofit, offers a way to home ownership for low- and moderate-income families that is based on a person’s payment history, not their credit score. (Barbara Haddock Taylor, Baltimore Sun video)

Baltimore residents with modest incomes will have a chance this week to secure affordable mortgages from a national nonprofit that is offering a radical alternative for tenants who rely on federal subsidies to pay rent: It will allow them to use their government vouchers to own, rather than lease, their homes.

The lending program is aimed at increasing homeownership in neighborhoods where soaring rents have left tens of thousands of low- and moderate-income tenants trying to live in Baltimore without being one of the nearly 7,500 tenants who get evicted each year.


The Neighborhood Assistance Corporation of America, working with two major national banks and blessed by the federal government, is also pioneering the effort to help residents convert federal Housing Choice, or Section 8, vouchers into equity-building mortgage payments.

The charity, known as NACA, has generated a buzz in the city: 2,000 people have pre-registered for an event that kicks off Thursday at 8 a.m. at the Radisson Hotel on Fayette Street and continues through Monday.


City Council President Bernard C. "Jack" Young said the effort could change the lives of families being priced out by high rents.

"It's going to be something great. Specifically for those folks paying these high rents of $1,000 and $1,500," Young said. "They could be using that money to be homeowners. They could have equity in their home and build wealth."

Advocates say the need for affordable housing in Baltimore is dire.

In a recent study for the Abell Foundation, Johns Hopkins University researcher Philip M.E. Garboden found that more than half of Baltimore's renters live in housing they cannot afford.

"57 percent pay more than 30 percent of their income for housing and, staggeringly, 33 percent pay more than half," Garboden wrote.

The U.S. Department of Housing and Urban Development is considering raising the amount that low-income families that receive housing subsidies are expected to pay for rent. The move would affect 4.7 million families that rely on federal housing assistance, including 13,000 in Baltimore.

Baltimore is one stop on a multi-city "Achieve the Dream" tour that NACA is making with $13 billion in loan commitments from Bank of America and CitiMortgage. Bruce Marks, who runs the Boston-based, 30-year-old nonprofit, says it will bring 150 staff to process mortgage applications. People with low to moderate incomes are encouraged to attend. The group does not impose income guidelines.

The event is also open to anyone regardless of residency, and the mortgages can be used to purchase houses anywhere.

Marks said repair and renovation costs can be built into loans for single-family homes, condominiums and multi-family houses. The group is authorized to help existing homeowners modify unaffordable mortgages. And, for the first time, NACA will allow tenants to direct their government rental subsidies toward mortgages written to be paid off within 10 to 15 years.

U.S. Housing and Urban Development Secretary Ben Carson on Wednesday will propose to increase the amount low-income households are expected to pay for rent.

Qualified clients may secure pre-approved loans at around 4.375 percent for 15-year and 30-year fixed rates, Marks said. Those who do not qualify will receive counseling.

"It is an unprecedented opportunity for people who have been locked out of homeownership to become a homeowner with the best mortgage terms in America," Marks said.

Marks said the nonprofit has approved about 60,000 mortgages and is a HUD-approved housing counselor. He said 80 percent of people who receive NACA pre-approvals successfully close on their loans. He said NACA's foreclosure rate is below 1 percent.


Ashaan Scott and his wife, Kameke, are among those who succeeded.

They were paying $650 a month three years ago to rent a one-bedroom basement apartment in Pigtown. It quickly became too cramped for the couple and their three children, aged 17 months, 7 years and 14 years.

An aunt in Prince George's County alerted Scott to NACA's programs.

Scott, 37, runs his own home improvement business. The coupled applied for a loan and bought a three-bedroom rowhouse in East Baltimore's Berea neighborhood, across the street from a new public school that their 7-year-old daughter attends and loves, for $71,000. Their mortgage carries a 2.7 percent interest rate and costs them about $531 a month.

"It feels awesome" to be a homeowner, Scott said.

Baltimore housing advocates are happy to see more lending in the city. But some asked whether NACA had the capacity to provide enough follow-up and support to the hundreds of people expected to seek the loans.

Neighborhood Housing Services and St. Ambrose Housing Aid Center are among many programs in Baltimore that help low-income families become homeowners.

Dan Ellis, director of Neighborhood Housing Services, said the NACA opportunity is exciting, but he hopes the people who apply are not disappointed.

"It's difficult to provide that type of assistance on the scale that is being proposed," Ellis said. "It's hard to really do this work. It takes a lot of time."

David Sann, housing development director at St. Ambrose, agreed. He said NACA's loans are based on an old lending practice called "character loans," which draw on a borrower's reputation and payment history, rather than on a computer algorithm.

"To a great degree, that is gone in the marketplace and there is an immense need for that," Sann said. "If they could bring that back meaningfully, then I think that's great."

Dozens of families live in Anne Arundel, Baltimore, Harford and Howard counties, in houses purchased by the Housing Authority of Baltimore City — part of a court-ordered relocation program designed to combat the intense inner-city segregation and poverty forged by decades of discrimination. That program — one of the nation's largest — has been discreetly rolled out to avoid the political and community opposition that routinely arises to defeat proposals for building subsidized

Alice Kennedy, a deputy commissioner for the Baltimore housing department, said making homeownership accessible to more people is a priority for Mayor Catherine E. Pugh. The city is not a sponsor of the NACA event, but officials helped promote it.

"Homeownership is an important part of community development, stabilization, revitalization and neighborhood cohesion," Kennedy said.

Live Baltimore director Annie Milli, whose nonprofit promotes homeownership in the city, said residents need to know that completing counseling with NACA, which is not a city-approved homeownership counseling agency, will not automatically make them eligible for cash incentives from the city and state, such as the Vacants to Value or Live Near Your Work programs.

Still, she said, the program could be "a good fit for buyers."

Young gives NACA credit for providing "out of the box" solutions for people who have been ignored or discriminated against by the market in the past.

Marks said "racist government and lending processes" of the past helped lock African-Americans and other minorities out of homeownership for generations. He said NACA's products could help to reverse those harms and revitalize Baltimore.

"We have a track record of getting results," Marks said. "People have everything to gain and nothing to lose."


Baltimore Sun reporter Doug Donovan contributed to this article.

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