Surviving the Mortgage Crisis - Christianity Today

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 sued for allegedly snookering borrowers into loans they couldn’t afford or didn’t understand. Earl L. Grinols, president of the Association of Christian Economists, said passages like Exodus 23:2-5 and Deuteronomy 15:7 should have kept Christian financial institutions out of this market.

“If a Christian institution is following biblical principles, they are not going to give out a loan to someone who isn’t qualified for it just because they feel sympathetic to that guy, nor are they going to disqualify them from getting that loan simply because they are poor,” said Grinols, distinguished professor of economics at Baylor University. “If the whole market had followed that principle, we wouldn’t be having the problems we are having now.”

To help borrowers who may have signed onto risky loans, America’s Christian Credit Union (ACCU), which provides loans to members of denominations in the Wesleyan tradition, sent letters offering counsel to each of its borrowers. The credit union found that of its $180 million portfolio, only about $1.2 million could be classified as sub-prime. One of its loans was past due, but not yet in foreclosure.

“Most of our loans are church loans,” ACCU president and CEO Mendell Thompson said, “and, thankfully, we don’t have the house of the Lord in sub-prime loans.”