Surviving the Mortgage Crisis
HomeBanc Corp. brought a Christian ethos to the seemingly lucrative market of sub-prime home loans. Flush with a staff of believers, the Atlanta-based company opened meetings in prayer and counted a megachurch founder its head of human resources.
But in mid-August, the company, which Fortune magazine ranked the 67th-best to work for earlier this year, filed for bankruptcy, reportedly laying off most of its 1,100 employees and closing 22 branch offices.
HomeBanc's demise was brought on by the same factor that led to its rise—a housing market that expanded, then shrank, on the back of risky home loans. Other Christian lenders felt the pinch, too. But unlike HomeBanc, most weathered the storm well, buoyed by the security of limiting loans for homebuyers.
The Evangelical Christian Credit Union, the largest Christian lender (and, with more than $1 billion in core assets, a rival to the largest secular lenders to nonprofits), never entered the home market. Other Christian lenders protected their home loans by staying away from sub-prime lending.
"Because of what we stand for and because of who we serve, we can't afford to put people into those loans," said Linda Tashiro, chief operating officer of the San Dimas, California-based Christian Community Credit Union. "We have to sleep at night."
The problem with sub-prime loans is that nearly any financial setback can send homeowners, often borrowers with little savings and poor credit histories, into a tailspin. Rising monthly bills brought on by adjustable-rate mortgages are especially damaging. RealtyTrac Inc. reported that nationwide foreclosure filings doubled in August from last year and rose 36 percent from July.
A number of companies specializing in sub-prime loans have been ...
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Comments
hisone
I still don't know why we as Christians buy into this system of homeownership. 30 years to pay-off a home is absolutely ridiculous. Now they are introducing 40 & 50 year mortgages. The houses are built like garbage and we should leverage ourselves for 30 - 50 years for them? That is not good stewardship at all. We allow this to go on. They make you pay double the amount monthly if you don't put 20% down (PMI Insurance) as well as offer these supposed deals that have variable rates designed to kill the homeowner. You end up paying more than 66% more for the house when you take out a mortgage. This is not scriptural. We need to find an alternative.
Paul Thomas
I’m sorry, but so-called Christian banks are not going to be any more honest than “secular” banks just because it says somewhere in the Bible that people in positions of authority shouldn’t take advantage of the relatively powerless. One only has to observe history to see that so-called Christian organizations can absolutely fall victim to the desire for money and power by taking advantage of the unsuspecting. What is actually required is more regulation. Banks need to be regulated. They are different from other sectors in the economy. De-regulation of the banking and securities industries in the 1980s by the Reagan Administration paved the way for the S & L crises which cost taxpayers $400 billion by 1992. Furthermore, unregulated markets in Asia during the 1990s led to the worst financial crisis since the Great Depression. What our economy needs is sound, fundamental economic and fiscal policies—the very policies that have been lacking in the allegedly Christian Bush Administration