WASHINGTON Maybe Bruce Marks was inspired by Michael Moores Roger and Me.
Like Mr. Moore, who doggedly pursued General Motors then-chairman Roger Smith in the 1990 movie, Mr. Marks trails banking executives until they agree to meet with him or pledge to fund mortgages through his Neighborhood Assistance Corporation of America.
Admire him or revile him, the activists tactics have reaped $4.3 billion in home loan commitments for low- and moderate-income people from lenders including Bank of America Corp., FleetBoston Financial Group, First Union Corp., and the former First Associates Capital Corp., now owned by Citigroup Inc. NACA, which is based in Boston, is currently working with half a dozen banks.
Were the junkyard dogs, said Mr. Marks, who at 46 shows no signs of mellowing despite NACAs growth from a militant arm of Hotel Workers Union Local 26 to a national organization with a $10 million-a-year budget. If were at war, were going to war and were going to win, he said.
Whenever the nonprofit group goes after a company following top executives to speaking engagements, protesting annual meetings, rallying on Capitol Hill, unearthing victims of predatory lending it gets nasty. We make sure that that CEO feels the same personal pain as his company caused the borrower.
One of its quarries was FleetBoston chairman Terrence Murray. For almost three years Mr. Marks went everywhere Mr. Murray went, including to his home and public events, and heckled him. When both testified before the Senate Banking Committee in 1993 about abusive lending, Mr. Marks wore a T-shirt bearing Mr. Murrays picture that said, wanted above the photo and loan shark below it.
In 1994, FleetBoston agreed to lend $140 million to NACA-assisted borrowers.
Ford Motor Co. was another victory. Mr. Marks and NACA volunteers confronted top executives at their offices, business meetings, and public events. Their goal: get Ford to sell Associates. The car company did in 1998.
Not every lender has to be bullied, Mr. Marks grudgingly conceded. Bank of America committed $3 billion without a hassle.
We believe all banks are evil out to maximize profits at the expense of working people, he said. The exception was Bank of America. We didnt need to get in their face. Hugh McColl its former chairman did it of his own volition.
NACA has 25 offices across the country and plans to be in all 50 states by early 2003. Each month, 9,000 people enroll in its mortgage-preparation program, which takes an average of six months to complete. Participants draft a budget, go through credit counseling, and pass a class on buying and owning a home. Once the program is completed, a person is eligible for a mortgage that requires no down payment and comes with no closing costs or fees. The rate is 1% below prime.
To date, 11,000 people have secured mortgage loans with NACAs help. Another 125,000 are in the mortgage-preparation program. We do as much pre-marriage counseling as possible, Mr. Marks said with a laugh. We try to inject reality into the infatuation period.
The default rate on mortgages NACA arranges is less than one-quarter of 1% a fact Mr. Marks uses to refute claims that lending to low-income borrowers is too risky.
NACAs top priority is to stabilize neighborhoods by increasing owner occupancy, so it does not impose earnings caps on participants. But it does require them to live in the home they purchase with a NACA loan. About 23% of NACA borrowers make less than $20,000 a year, and only about 1% earn $70,000 to $75,000.
Mr. Marks sees NACA, which he founded in 1988, as a vehicle for empowering the poor and as an antidote to predatory lending.
By not requiring that people make a down payment, the organization enables many who would never qualify for a conventional loan to become homeowners. And because its agreements with its banking partners prohibit fees, balloon payments, credit insurance, and prepayment penalties, its borrowers cannot be victimized, he said.
People shouldnt be locked in to high-interest loans just to assure banks profits, he said, comparing much of the subprime market to loan sharking.
Mortgages are fraught with peril for unsophisticated borrowers, Mr. Marks said. Practices worth billions to lenders but of dubious benefit to the customer, such as frequent refinancings, unreasonably high interest rates, and yield spread premiums, need to be curbed, he said.
Mr. Marks supports federal predatory lending legislation, such as the bill introduced by Rep. John J. LaFalce, D-N.Y., but fears it has little chance of being enacted. That is why NACA has been working to convince local and state governments to pass anti-predatory lending bills that, at a minimum, would prohibit balloon payments, restrict prepayment penalties, and forbid bankers to make loans they know the borrower cannot possibly repay.
The group was active in DeKalb, Ga., which recently passed a tough law, and plans to focus on Florida, California, New York City, and Kansas City, Mo., among other places.
NACA has a built-in base of volunteers. Everyone taking advantage of the mortgage-preparation program must commit to participating in at least five protests a year for as long as they have an NACA mortgage.
The group has been targeting Fannie Mae for years with no effect.
A few years back, when former Fannie chief executive officer James Johnson spoke at a community reinvestment conference, NACA volunteers distributed flyers with his picture that read: I make $6 million a year, and I can afford a down payment. Why cant you?
The companys new chief, Franklin Raines, has inherited the abuse. Mr. Marks said NACA volunteers chant outside his office and disrupt meetings he attends. Were going to continue our aggressive and confrontational tactics against Fannie Mae, he said.
Though the other secondary market giant, Freddie Mac, is currently negotiating with NACA, Fannie so far has refused to meet with Mr. Marks.
NACAs beef with Fannie is threefold.
First, Mr. Marks claims Fannie encourages predatory lending by setting the standards for conforming mortgages too high. He wants the company to buy more of the mortgages put together by groups like his. If banks could sell these loans into the secondary market, they would be more willing to make them, Mr. Marks argued. If banks made more of these loans, then fewer people would be forced into the more expensive subprime market, he explained.
Additionally, Fannies new willingness to buy subprime loans perpetuates the cycle of overcharging the poor, he said. The loans generate more revenue and if bankers know Fannie will buy them, lenders will continue to make more high-cost loans to people who should qualify for less expensive ones, Mr. Marks charged.
Finally, Mr. Marks accused Fannie of silencing potential critics by threatening to withhold its financial support from groups that rely on it.
Mr. Marks could not state specifically how Fannie should change its standards or how it might securitize a bunch of customized mortgages. But he insisted Fannie has a mandate to promote affordable housing, and that this responsibility includes buying more low-income mortgages originated by banks. The private sector is trying to meet the needs of poor people, he said, and Fannie Mae is manning the barricade saying stop.
Mr. Marks is pushing Rep. Richard H. Baker, R-La., to add an amendment to his GSE reform bill that would require Fannie to loosen its criteria for buying mortgages. A spokesman for Rep. Baker would not comment directly but said the congressman is very interested in devising a way to ensure the government-sponsored enterprises use the benefits they get from government sponsorship to help more low- and moderate-income borrowers.
Clearly, Mr. Marks relishes his role as chief bank agitator.
The fun has just begun, he said.