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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November 2007

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