Thursday, May 21, 2009

Housing Hustlers

In the grand tradition of civil rights shakedown artists and poverty pimps come the "housing activists" who definitely are not letting the current crisis go to waste. Yesterday's WSJ profiled one such activist named Bruce Marks and cataloged some of his group's outrageous behavior:

Mr. Marks's nonprofit organization, Neighborhood Assistance Corp. of America, has emerged as one of the loudest scourges of the banking industry in the post-bubble economy. It salts its Web site with photos of executives it accuses of standing in the way of helping homeowners -- emblazoning "Predator" across their photos, picturing their homes and sometimes including home phone numbers. In February, NACA, as it's called, protested at the home of a mortgage investor by scattering furniture on his lawn, to give him a taste of what it feels like to be evicted.

In the 1990s, Mr. Marks leaked details of a banker's divorce to the press and organized a protest at the school of another banker's child. He says he would use such tactics again. "We have to terrorize these bankers," Mr. Marks says.

This is truly despicable. What's even more shocking than the behavior itself is that no one seems willing to call out Marks on it.

Though some bankers privately deplore his tactics, Mr. Marks is a growing influence in the lending industry and the effort to curb foreclosures. NACA has signed agreements with the four largest U.S. mortgage lenders -- Bank of America, Wells Fargo & Co., J.P. Morgan Chase & Co. and Citigroup Inc. -- in which they agree to work with his counselors on a regular basis to try to arrange lower payments for struggling borrowers. NACA has made powerful political friends, such as House majority whip James Clyburn of South Carolina, and it receives federal money to counsel homeowners.

So the federal government--in other words you, me and everyone else who pays taxes--is subsidizing an organization whose leader views "terrorizing bankers" as a legitimate tactic to "help" homeowners?

Lest you think Marks' efforts will only damage the much vilified "bankers" consider what his goals are:

"We have the opportunity to change how lending gets done in this country," says Mr. Marks, whose group is itself a mortgage broker and has 40 offices staffed with housing counselors. He favors a return to more traditional standards, with full documentation of income and the same fixed interest rate for everyone.

Instead of relying on credit scores, he thinks lenders should look into the reasons for any late payments in prospective borrowers' past and prepare renters for the responsibilities of home ownership. Then, if people are given a loan they can afford, they shouldn't be required to make a down payment, he argues.

Sounds great doesn't it? The same interest rate for everyone. No down payments. What could be wrong with that?

Critics doubt some of these changes would be helpful. Having to use a single interest rate for all would make banks less likely to lend to people with blemished credit records, says Richard Riese, an executive at the American Bankers Association.

A single rate also could lead to higher rates for everyone, adds John Courson, chief executive of another trade group, the Mortgage Bankers Association.

So many of the people that Marx Marks claims to be helping wouldn't get loans and many others would have to pay more? Sign me up.

For now, NACA's main focus is fighting foreclosure, and the 53-year-old Mr. Marks pursues it relentlessly. NACA holds mass "Save the Dream" gatherings, flying in hundreds of counselors to work with borrowers who hope to restructure their mortgages.

At one in Columbia, S.C., in March, a line of homeowners stretched around an arena waiting to meet counselors in canary-yellow T-shirts reading "Financial Predators Beware." Mr. Marks, dressed in black and wearing a NACA cap, circled the arena with a bullhorn. "We're gonna get it done!" he bellowed.

Erick Exum, a NACA official, told those present: "What happened is not your fault. The mortgage crisis is the result of abuses and exploitation by Wall Street." Even so, he said, they might have to make sacrifices: "If you have a car payment and a boat payment, the boat may not make sense."

Terrorize the bankers, skin the Wall Street fat cats, and make irresponsible borrowers give up ONE of their goodies. Sounds like a shared sacrifice.

Mr. Marks grew up in affluent Scarsdale, N.Y., and Greenwich, Conn. He says a childhood stuttering problem gave him sympathy for underdogs, which evolved into a career as an activist. He studied business to "know the enemy," earning an M.B.A. and working briefly for the Federal Reserve Bank of New York. A later job for a labor union stirred his interest in reviving poor neighborhoods and helping people afford homes.

Boy have we seen that blueprint for social activism before.

What's really depressing is that most of the bankers--like the companies that Jesse Jackson's Rainbow PUSH targeted--find it far less painful to pay the tribute than to fight back:

In 1988 he launched NACA. It soon began arranging loans for Boston-area banks that were eager to show they were serving poor neighborhoods, in compliance with the 1977 Community Reinvestment Act.

The organization has been allocated $34.5 million from a new federal program to counsel distressed mortgage borrowers, to be paid to groups such as NACA little by little as they provide counseling. NACA's slice is nearly 10% of the program's funds; the rest goes to more than 100 other nonprofits and state agencies. Besides these grants, most income to cover NACA's roughly $40 million annual budget comes from the fees lenders pay it for arranging new mortgages, typically $2,500 per loan.

So what the government doesn't cover gets picked up by lenders afraid of facing NACA's terror tactics. Nice racket if you can get it.

Another NACA event is the "predator's tour." In February, it sent hundreds of protesters to the homes of bankers and investors in posh New York suburbs such as Rye, N.Y., and Greenwich. One stop was the home of William Frey of Greenwich Financial Services, a broker-dealer specializing in mortgage-backed securities. He was a target because he resisted some aspects of a settlement that called for modifying loans.

State attorneys general had accused Countrywide Financial Corp. of predatory lending, and Countrywide's new owner, Bank of America, settled the suit last year by agreeing to modify many mortgages. A fund Mr. Frey controls then sued the bank. The suit didn't take issue with the settlement but complained that the bank had passed on most of the cost of it to buyers of securities backed by Countrywide's loans.

Mr. Frey was the target of the protest in which NACA dumped furniture on the lawn. "They had hundreds of people trespassing on my property," he says.

"I have a difference with Bank of America. I have a substantial amount of assets with them," Mr. Frey says. "We take them to court. This is how we do it in this country....It's a civilized society." The response from NACA, he adds, "is a mob showing up at someone's house to intimidate them to drop this suit. At what point do people say, 'This is starting to be uncomfortable'?"

"It should be uncomfortable," says Mr. Marks. "You win a campaign by being relentless. Everybody has a breaking point....At some point they say, 'How do I get these crazies off my back?' "

Poor Mr. Frey. He actually believes in such quaint notions as the rule of law, property rights, and civilized society. He doesn't understand that for a committed activist in pursuit of a noble goal, there are no limits. Well, almost no limits.

Some lenders have refused to sign contracts to work with NACA, among them HSBC Holdings, Barclays and Credit Suisse Group. All declined to comment. Mr. Marks says some banks that won't sign agreements do negotiate individual cases with NACA. Even so, NACA sometimes pictures their executives and the executives' homes on its Web site.

It recently added a photo of William Gross of Pacific Investment Management Co., the big bond house known as Pimco, along with pictures of his home and other information. Mr. Marks says his contacts in banking and government tell him Pimco doesn't support the administration's push to modify mortgages. "We're exposing them," Mr. Marks says. A spokesman for Pimco said neither it nor Mr. Gross would comment.

Mr. Marks says financial executives should be held personally responsible for actions that affect people's lives, and "if they interpret that as intimidation, so be it." He says that "we're not talking about violence. We don't do violence."

Nice to know where Marks draws the line. His group will terrorize, intimidate, and drive bankers to the breaking point, but they won't actually commit physical violence. Yet.

Oh by the way, Marks--who enthusiastically endorses exposing the privacy, homes, faces, and children of bankers to the public--is suddenly very secretive when it comes to disclosing information about the activities of his own group:

Despite receiving taxpayer money, NACA doesn't provide public reports on either its loan-brokerage business or its campaign to modify mortgages. Jim Campen, an economics professor emeritus at the University of Massachusetts, Boston, says he tried in the 1990s to analyze the performance of loans arranged by NACA, but Mr. Marks refused to provide data.

Mr. Marks says he feared the data would be used by another nonprofit to discredit his group. NACA does provide information to lenders that work with it, he says, but sees no duty to disclose it to the public.

"He's been very effective in shaking money out of the banks," says Mr. Campen, but "he's not one to open up his records to public scrutiny."

Getting government funds to help shake down corporations while refusing to disclose your own financial information? We definitely have seen that playbook used before.