If you’re not familiar with the Neighborhood Assistance Corporation of America (NACA) and their homebuying program, you should probably remedy that.

With lenders instituting “… the toughest loan-approval standards in years,” according to Joe Light at Bloomberg.com, many buyers who are on the margins may be seeking the organization’s help.

There are a few twists and turns in the NACA mortgage transaction that both buyer and seller agents need to know about.

First, some background

NACA is not a lender, but a “non-profit, community advocacy and homeownership organization,” according to the NACA website. The group’s focus is low-to-moderate income homebuyers who are registered to vote.

The organization is certified by HUD to meet its goal of helping to provide affordable homeownership, with the same terms for all of its members.

Self-titled “America’s Best Mortgage Program,” NACA’s terms include providing loans with:

• No down payment or closing costs
• No fees, no points
• Rates are fixed and below market
• Credit score isn’t taken into consideration

To get the mortgage, the buyer must join NACA by paying a $25 membership fee (payable every year, and agreeing to take part in “. . . five actions and activities a year and at least one prior to NACA Qualification and one prior to closing …”

Sounds great, doesn’t it?

And, it is, and will be for the buyers on the fringe of qualification who may be locked out of the market by the new, more-stringent loan qualification standards.

For agents and home sellers, however, it’s a whole different story. Many that we’ve spoken with call the program’s transactions “nightmares.”

One listing agent said that her seller almost removed her listing because of the challenges she was forced to endure and the long (very long) escrow period.

The agent’s part in the process

First, you should know that NACA has its own roster of buyers’ agents and they strongly encourage their members to use them.

Because these agents have experience with the process, they do have a lot to offer the buyer. But if your buyer decides that a NACA mortgage is the only way to “achieve the dream,” you’ll need to protect your interests.

Get a signed buyer’s broker agreement before your client attends the first workshop.

And, don’t bother recommending your favorite home inspector because buyers are required to use “… a licensed home inspector who either is or will be registered with NACA and agrees to use the HomeGauge software,” according to the organization’s website.

Although the organization claims to close most loans in 28 days, we’ve heard from several agents who experienced repeated requests for contract extensions and two said the deals took five months to close.

NACA also specifies that buyers demand the removal of the following from the purchase agreement:

• Forfeiture of earnest money if the buyer can’t qualify for the loan or the home doesn’t appraise.
• Penalties for not closing on time

The contract must include:

• A contingency that the home is approved by NACA-approved home and pest inspectors
• A closing date of at least 30 days, longer if the home requires work
• Settlement services must be provided by an approved NACA settlement agent

Ok, suppose you are working with a new buyer who tells you he or she will be applying for the NACA mortgage. The most important next question is “Have you been in touch with anyone from NACA?”

And here is why this question should be first:

If the buyer “has been involved with or been in previous contact with NACA at the time the Member [your potential buying client] is referred to the Program, you will not be able to register them to your name,” according to NACA’s website.

The organization has a whole slew of rules for outside agents who bring in buyers and you can catch up with those at nacalynx.com.

Or, you could become a NACA-approved agent

The organization is actively seeking real estate agents, nationwide, so if you’re looking for an additional source of leads, you may want to look into it.

Get the details online at workforcenow.adp.com.

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