Bob Lupton, founder and president of FCS Urban Ministries in Atlanta, never believed in the overreliance on subprime products to be sustainable. Despite a ministry mission to help low-income families buy homes and establish community, his organization somehow steered clear of the temptation to employ overly exotic financing options.
But the marching orders kept coming from the top. Political leaders, including President George W. Bush and New York's powerful Democratic congressman Charles Rangel, extolled the value of rising home ownership rates throughout the early part of the decade, seemingly unconcerned with the correlating rise of suspect lending practices.
Armed with government sanction, federal guarantees, and an overzealous profit motive, banks and brokers discarded long-held loan requirements and reinvented the world of subprime-no credit, no income, no down payment, no problem. The overwhelming bulk of real estate market leaders embraced the politically popular maxim of home ownership for all. In so doing, they ushered in an economy-wide slowdown complete with an entirely new set of maxims: home equity for few, home foreclosure for many, and tax-dollar bailouts funded by all.
Worst of all, the disaster was avoidable. Common-sense voices warned of impending doom but met only criticism as party-poopers from a by-gone era. Now, those once-dismissed calls for restraint appear prophetic, suddenly awash in fresh credibility. Lupton and FCS are out to clean up a mess they didn't help make, buying up homes in foreclosure for the sake of offering affordable housing in a time of crisis.
It's just one of many initiatives from urban nonprofits nationwide eager to serve low-income home buyers with something other than a risky loan. Some of the best and most innovative alternatives to subprime are emanating from Christian organizations that employ biblical principles of compassion.
Lupton reports that in one particularly hard-hit Atlanta neighborhood, the only homes not in danger of foreclosure are those that were constructed and sold within the ministries of either FCS or Habitat for Humanity. Both organizations are intent on preventing any future repeat of the current real estate mess. But even among two successful Christian ministries, differences of opinion exist about how best to provide affordable housing without irresponsible lending. Lupton criticizes the Habitat strategy of clustering low-income housing close together. He believes sustainable community requires higher ratios of more financially stable and accomplished home owners mixed among those on the first rungs of the economic ladder. But Habitat's cluster strategy is highly visible, often attracting considerable media attention and accompanying donations.
Either way, the outcomes of FCS and Habitat efforts have proved far better for low-income home buyers than the false compassion of subprime lending. That disparity recommends the effectiveness of Christian charity and underscores the value of relationship in truly serving the poor. Lupton explains that ongoing interaction between ministry workers and clients leads to better assessment of loan eligibility-or lack thereof: "Home ownership is not for everybody. For some, renting is optimal."
That kind of honesty rarely spills from politicians. But it forms the basis of Christian alternatives to subprime lending and underlies some of the top low-cost housing efforts in the country:
FCS Urban Ministries-Atlanta
Context: Like many urban centers, Atlanta is home to several low- and middle-income neighborhoods particularly vulnerable to economic downturns. FCS Urban Ministries operates in a community where about one in every four homes is vacant. Such endemic turmoil invariably builds on itself. Empty homes are looted or become shelters for drug addicts and the homeless, crushing the value of area real estate and rendering the streets unsafe.
Mission: FCS presently aims to purchase about half of the vacant homes in its neighborhood of focus for the sake of restoration and resale. In the name of that mission, the ministry has suspended all new construction projects, recognizing the greater urgency and opportunity that rampant foreclosures present. Since prices are generally low, FCS can relist the fixed-up properties for reasonable sums or offer rent-to-own options for families yet unable to qualify for a loan. In either case, the ministry leads its clients through a year of financial training to help ensure the property's history does not repeat. With those tools, renters learn to build credit such that they can take on a mortgage for their home in three to five years.
Bethel New Life and Lawndale Christian Development Corporation-Chicago
Context: Foreclosures in the Windy City have reached such high levels that Cook County Sheriff Tom Dart recently refused to continue carrying out court orders for eviction. He said that an estimated third of the 400 to 500 foreclosure evictions his department executes each month are renters, many unaware that their landlord has fallen behind on the mortgage. The sheer volume of evictions has made it nearly impossible for banks to ascertain whether the occupants of a property are renters and deliver prior notice of impending trouble. About $2.5 billion worth of property in the Chicago area went back to lenders in 2007.
Mission: Bethel New Life's SmartSavers program provides incentive to live on less and save for a down payment on a home, even for those with low incomes. When clients meet initial savings goals, the ministry begins matching every dollar saved with two dollars, helping to build momentum toward qualifying for a mortgage. In the meantime, the organization teaches classes on basic personal finance and offers pre-purchase and post-purchase seminars. Likewise, the Lawndale Christian Development Corporation emphasizes education as a primary means to lead people into home ownership but away from bad loans. Both organizations participate heavily in the construction of affordable housing, both to rent and sell.
Community Development Corporations-nationwide
Context: The country's foreclosure crisis has hit urban and suburban populations alike-and shows little sign of slowing down. The number of foreclosures this past August was 27 percent higher than that of a year ago, according to RealtyTrac, which maintains and publishes the most complete national database on the issue.
Mission: Community Development Corporations, many of which explicitly adhere to a Christian worldview, are more interested in long-term community stability than putting any one family or individual in a home. Central Detroit Christian CDC, one of many similar small groups throughout the country, builds new homes and rehabs old ones in the interest of providing affordable housing. The organization operates on the strength of unpaid volunteers and builds personal relationships with clients that can help prevent the private financial woes that often lead to foreclosure. The New Kensington CDC services neighborhoods in Philadelphia, where it offers budget counseling, requires low-income borrowers to obtain training before loans, and constructs affordable options for low-income buyers.
Christian credit unions-nationwide
Context: Creative subprime lending is not new, but its widespread popularity is. A booming real estate economy drove many lenders to feature exotic products or face losing clients to those institutions that would. The need to stay competitive pushed many brokers to trade in balloon payments or negative amortization loans all for the sake of quoting a smaller monthly payment.
Mission: Most Christian credit unions throughout the country resisted the temptation to push risky loans in what seemed a risk-free economy. One such institution, the Christian Community Credit Union in San Dimas, Calif., wholly avoided the subprime market because as Executive Vice President Dave Estridge says, "It's just not wise financial stewardship, presuming on the future appreciation of properties. Fortunately, if we didn't look out the window or read the newspaper, we wouldn't necessarily think there was a major financial crisis out there." That perspective is not uncommon among Christian credit unions, many of which loan primarily to ministries and churches and consider it an obligation to the gospel that every measure is taken to avoid mortgage defaults.