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Too Much Faith In Lending, Literally

A sustained housing boom, brought out a lot of new lending concepts that all look a little icky right now. One of them made it to the front page of the Wall Street Journal on Monday in the article Mortgage Woes Take Toll on Lender With Roots in Faith [1]

Apparently having had faith in your mortgage broker or bank, literally, wasn’t enough to keep HomeBanc from filing for bankruptcy, another victim of the mortgage crunch.

HomeBanc wasn’t unique in its faith-focused business model. As the credit business boomed over the past decade and finance companies scrambled to differentiate themselves, church and religiously oriented lending became a hot niche, particularly in the Southeast.

The housing boom created opportunities for niche services like faith-based lending to prosper.

Most of HomeBanc’s 450 loan officers had no prior experience in the business. Many were local church leaders or family members and friends referred by HomeBanc staff. Former employees say HomeBanc also sought out former college and professional athletes and military veterans, who brought with them extensive networks of personal contacts and enjoyed the company’s high-volume sales strategy. HomeBanc required all potential loan officers to list 150 contacts as proof of an existing network.

The article mentions two large banks that created specialized faith-based lending services: Wachovia and SunTrust

As the housing market cooled, investors soured on buying securities based on mortgages. No matter what your religious persuasion, investors were non-demoninational about being risk-averse.