Written by Steve Dibert, MFI-Miami.com

Now She Endorses The Shady Practices Of A CRA Operator

After reading another one of Susan Webber aka Yves Smith at Naked Capitalism Monday articles, I have to wonder if she really is inhaling something toxic because it is even crazier than her gushing endorsement of Lisa Epstein of Foreclosure Hamlet fame who ran unsuccessfully for Palm Beach County Clerk. In that piece, she ignores that Epstein appears to be operating Hamlet as an unlicensed charity and has financial ties to confessed mortgage fraudster, Carol Asbury.

In one of her posts from this week, she lavishes gushing praise on Bruce Marks from NACA fame, a self described, “Financial Terrorist” This endorsement shows that she either doesn’t do any research or her judgment is impaired. Now, I have no idea if Smith drinks, does drugs or sniffs glue. As far as I know, she’s as alcohol, stimulant and drug free as Mitt Romney or as a Muslim in Riyadh but something is a amiss at the offices of Naked Capitalism.

For those of you who don’t know, Bruce Marks runs a Community Redevelopment Act (CRA) Housing Agency out of Boston called Neighborhood Assistance Corporation of America (NACA). This NACA should not be confused with another NACA, the National Association of Consumer Advocates which has consumer attorneys and real consumer advocates as members Naturally, these two NACA groups are locked in mortal combat because the National Association of Consumer Advocates feels Bruce Marks hijacked their Acronym. Think of it like the NAMBLAs from South Park. The Good NAMBLA, National Association of Marlon Brando Look Alikes and the bad NAMBLA, National Association of Man/Boy Love Association.

Before I get to how Bruce Marks and NACA operate and make their money, I should explain what a CRA is. The Community Redevelopment Act was passed by US Congress in 1977 to encourage banks help low- and moderate-income neighborhoods become homeowners. Through FDIC mandates, banks can offer low interest mortgages with the local municipality donating the land or leasing the land to the homeowner. Banks like CRA clients because it helps them get FDIC approval when they want to expand their business, merge with another bank or want create a branch network in certain parts of the country.

NACA may be a designated CRA Housing Non-Profit but when you dig deeper you see that it is really nothing more than a for-profit enterprise disguised as a housing non-profit. What Bruce Marks isn’t telling people is on top his grant money he gets from the federal government, he is also getting paid by lenders for the homeowners he helps them refinances.

“Quantity has a quality all its own.” -Joseph Stalin

There is a reason why Bruce Marks likes doing his “Financial Terrorist” shtick and it’s not because he wants to make the banks afraid of him. It’s for what is known in marketing as “Sideways Marketing”. Marks uses the media to give NACA not only exposure and free advertising but he uses it to give him and NACA credibility especially when he brags about tormenting the young children of banking executives by driving to their school and yelling to them that their daddy is a monster. All of that notoriety, helps him create a Robin Hood persona. It then helps him when he announces he’s bringing his foreclosure rescue version of “Brother Love’s Traveling Salvation Show” to a local community. He also uses his status as a CRA Housing Non-Profit as a way for local television stations to give him free advertising time. He doesn’t pay for the convention center space.

The reason Marks wants thousands of people to show up to NACA events is because if 2,500 people show up then it becomes a media event. The media shows people standing out front of the convention hall and because people have herd mentality more people rush to the event.

NACA isn’t the nightmare for banks that Bruce Marks likes to portray. They’re just the opposite. His events are to the CRA world what Russian romance tours are to lonely middle aged American men because like Russian romance tour operators, NACA helps connects potential CRA mortgage clients with banks.

What Marks doesn’t tell people is he uses the event to screen people for Community Redevelopment loans which account for 5% of the people who come through the door. Because he is legally a “housing non-profit” he can get a discounted interest rates from the bank and NACA gets fat check from the bank. Marks and NACA pocket nearly 4% oof the loan. If the loan closes, NACA gets a loan origination fee of 2% and an SRP of 2% on the back end of the loan from the lender.

An SRP is the payment NACA receives from the lending institution, they get when they sell a closed mortgage loan to the secondary mortgage market to Fannie Mae, Freddie Mac, or Ginnie Mae.

Marks along with the banks are playing a numbers game. If he has 10,000 people show up to an event and he closes 500 files with an average loan amount of $150,000 he made $3,000,000 from the event. Banks will enthusiastically pay for the convention space for a NACA event because they can write $75,000,000 in mortgages that will be sold to the federal government that they will have the servicing rights for. So the more people that show up to an event, the more money both NACA and banks can potentially make.

There is another way NACA helps banks make money and it’s from of the other 95% of homeowners that NACA can’t help. The banks have Bruce Marks and NACA to thank for the billions of dollars they make off foreclosed homes. Not only are banks writing an estimated $75 million in loans at each NACA events but they’re also pocketing billions of dollars in profits when Marks and his staff giving false hope to tens of thousands of homeowners who eventually lose their homes.

NACA signs up the majority of these homeowners knowing full well they can’t help them. They give these homeowners false hope by making them believe that NACA is helping them and is working on their file when in reality, nothing is being done. Naturally, because they believe NACA is working on the file and like typical homeowners who working with a third party to negotiating a loan modification, they stop making their mortgage payments. This is usually because the group helping them negotiate the modification or the lender told the modification company to tell the homeowner to quit making the payment because the lender won’t help the homeowner if they are not 90 day behind on their mortgage.

I’ve written quite a few times about how mortgage servicers make money from mortgages in default and how when a MBS Trust cashes in it’s insurance policy that the mortgage servicer is the first to swoop in and buy the outstanding loans in the mortgage trust for pennies on the dollar. This means if the servicer buys a mortgage from the MBS for $2000 that has a face value of $200,000, the servicer who is now the owner can foreclose and sell the property for $80,000 is still make a profit of 40x what they paid for it.

Like I wrote last week either Yves Smith’s judgment is impaired or she is attempting to broaden her audience by attempting to appeal by taking a more populous approach to her writing. I’m hoping that’s her plan. If she is, she needs to do more research before embracing people advertising themselves to be “advocates”.