NACA Analysis: 80% of POAs Have Something "Illegal' In Them

Neighborhood Assistance Corp. of America generally finds something "illegal" in about 80% of the payment option ARMs it studies, according to its chief executive, Bruce Marks. Mr. Marks told a congressional panel that his organization conducts forensic underwriting on "pick-a-pay" loans as some payment-option ARMs are known. He noted that the problems his group finds give its housing counselors more weight in getting servicers to modify loans and reduce the monthly payment by $500 to $1,000. Between 2005 and 2007 lenders funded roughly $805 billion of POAs, according to figures compiled by National Mortgage News. The NACA CEO said the Obama administration's Home Affordable Modification Program is not working because servicers are seeking documentation for eligibility after the three-month payment trials. With the backing of Bank of America and other lenders, NACA underwrites the loans at the start of the modification process. During the hearing Rep. Maxine Water, D., Calif., said that when fraud is involved these "loans have to be modified."