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Making tattered U.S. mortgages whole again

A California family meets with a financial counsellor at a Neighborhood Assistance Corp. of America (NACA) event in Daly City, Calif.

Justin Sullivan/Getty Images/Justin Sullivan/Getty Images

When Vonciel Offord walked into a Jacksonville, Fla., conference centre to renegotiate the terms of her mortgage, she felt her entire life depended on the outcome of her brief meeting with bank representatives.

Without a deal, she'd lose the four-bedroom house she'd been living in for six years. She'd be forced to find rental accommodations for herself and a disabled sister, and deal with the stigma that comes with having the bank foreclose on your dream.

"I had a death in my family and then my sister got very ill and had to move in with me," said Ms. Offord, an Orlando-based salesperson. "It was just one thing after another and I fell behind on the mortgage."

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So with a pile of papers in hand outlining her finances and history, she drove from Orlando to Jacksonville to meet her lender at a three-day renegotiation event put on by the Neighborhood Assistance Corp. of America (NACA), a grassroots organization that was founded to help Americans in danger of losing their homes refinance their mortgages.

Although the U.S. economy has been slowly rebuilding since the 2008 recession, the housing market remains mired in a deep slump. Values have dropped by as much as 60 per cent in some neighbourhoods, and at least 2.7 million homeowners who took out mortgages between 2004 and 2008 have faced foreclosure.

Another four million are expected to run into trouble over the next two years, prompting U.S. President Barack Obama to create a program intended to help millions of frustrated middle-class homeowners refinance their homes at lower rates, even if they owe more than the house is worth.

The stakes are high – banks are carrying billions of dollars on their books in risky mortgages, and each time one of those mortgages fails, they are stuck with a house to sell. The government – through Fannie Mae and Freddie Mac – insures more than a trillion dollars in loans, providing it with incentive to help solve the housing crisis by whatever means necessary.

But the Obama program is limited – it only helps homeowners who are current on their payments, and their loans must be guaranteed by the government. This excludes a wide swath of the most vulnerable, NACA says, and does little to keep those people in their homes.

"We're doing something different here," says NACA representative Darren Duarte from the floor of the Jacksonville convention centre. "We think these good people here deserve a chance to talk to their banks, too."

There are plenty of reasons to keep these people in their houses. While many of them obtained loans under less-than-ideal circumstances as U.S. banks rushed to issue credit during the boom years leading up to the recession, they still want to pay their loans.

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But with interest rates as high as 10 per cent at a time when mortgage rates are at all-time lows, they are being forced out when a simple rate reduction can keep them in place and save the trouble and expense of foreclosure.

It would also help the broader economy – Karl E. Case, a professor of economics at Wellesley College, said in a recent paper that the decline in house prices from 2005 to 2009 lowered consumer spending by some $240-billion (U.S.) – equal to about 1.7 per cent of all of the country's economic activity.

NACA was founded in the backroom of a Boston union hall in 1988, as the Hotel Workers Local 26 created the organization to help it negotiate a housing trust fund with management that would help workers make down payments on houses.

Under president Bruce Marks, it evolved over the years into an aggressive defender of homeowner rights. Frequently referred to in the U.S. press as a "bank terrorist," Mr. Marks has led the fight against "predatory lending," appearing before congressional hearings and actually getting arrested as he protested at a Senate committee appearance by Chase Home Lending chief executive officer David Lowman.

In 2007, it created the "Home Save Program" to help homeowners renegotiate their loans with their lenders. It criss-crosses the country holding huge seminars in which homeowners are taught how to fill out forms and express their situation in a way that will appeal to their lenders.

Then, they whisk them into another room where dozens of bank representatives are waiting to hear their cases. In some instances, those who attend the events walk out with a modification the same day. Others are sent back to do more work on their budget, while more yet are told there's no help to be found.

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NACA receives government funding for each person it sees, which has led some to criticize the organization's motives for holding large events that often run 24-hours-a-day and could provide false hope to many homeowners who are destined for foreclosure regardless of their interest rate.

But Ms. Offord isn't likely to pay much heed to the critics. She walked into the converted rail station in Jacksonville – along with about 1,000 distressed homeowners – with a mortgage rate of 5.5 per cent. She walked out hours later locked in at 3 per cent – a savings of $380 a month.

"I thought maybe a temporary solution, I didn't realize I could get a permanent one," she says afterward, in shock that she'll be able to keep her house. "I've been losing sleep, but I won't be losing sleep now. I can make this payment."

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