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 April 26 and ends on April 30.
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 researcher Philip M.E. Garboden found that more than half of Baltimore's renters live in housing they cannot afford.
"Fifty-seven percent pay more than 30% of their income for housing and, staggeringly, 33% 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.
Marks said repair and renovation costs can be built into loans for single-family homes, condos 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.
Qualified clients may secure pre-approved loans at around 4.375% 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 some 60,000 mortgages and is a HUD-approved housing counselor. He said 80% of people who receive NACA pre-approvals successfully close on their loans. He said NACA's foreclosure rate is below 1%.
Ashaan Scott and his wife, Kameke, are among those who succeeded.
They were paying $650 per 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 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% 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 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 Housing Aid Center, 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 a computer algorithm.
"To a great degree, that is gone in the market place and there is an immense need for that," Sann said. "If they could bring that back meaningfully, then I think that's great."
Alice Kennedy, a deputy commissioner for the Baltimore Housing department, said making homeownership accessible to more people is a priority for Mayor Catherine 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 that promotes homeownership in the city, said residents need to know getting a loan from NACA, which is not a city-approved homeownership counseling agency, could jeopardize their eligibility 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."
