Posts tagged with: mortgages

Blog author: ckaupke
Thursday, July 12, 2012
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Yesterday I blogged about the unintended consequences of the federal government’s mandate that Stafford student loan interest rates would not double as scheduled on July 1. Organizations such as the Jubilee USA Network praised the government’s action as an act of Christian charity towards students who were oppressed and taken advantage of by unscrupulous lenders. The phrase “predatory lenders” has been coined to describe entities that intentionally deceive borrowers into accepting loans they won’t be able to repay without going bankrupt. This is the accepted narrative, and is certainly what the Jubilee USA Network would like us to believe is true. However, this may not be the whole story.

In a working paper called “Complex Mortgages,” a group of four economists studied the differences between traditional mortgage borrowers – who paid down their balance over time – and complex mortgage borrowers, and found considerable evidence that suggested that many complex mortgage borrowers may have gone into mortgages fully intending to default. Thus the paper coined the term “predatory borrowers.”

The paper found that people who defaulted on complex mortgages were more likely than traditional mortgage borrowers to be highly educated and more highly paid, and to have higher credit scores, and they often defaulted even though they were not suffering financially. Complex mortgages are also more frequent in “non-recourse” states, where borrowers are legally protected from being pursued by lenders.

In summary, many mortgage defaults were not the fault of unscrupulous lenders, but rather, of unscrupulous borrowers. The accepted explanation for the housing bubble may only explain a part of the problem. If so, it is a sign of the moral laxity of our times that so many people seem to have no qualms about entering into agreements they fully intend not to keep.

Click here to read more.

It’s not quite gotten to the point of robbing Peter to pay Paul, at least not yet, but following the spate of foreclosures on residential and commercial properties, you can expect another rash of foreclosures on church buildings across the country. There are a number of factors that will contribute to this phenomenon. In no particular order:

  • In many churches the same people who overbought McMansions run the church’s finances. They wanted to be as comfortable at church as they are (or were) at home, and so they led the church into overbuying.
  • The general economic decline will lessen the ability and/or willingness of members to give.
  • Decreased tax deductions will disincentivize giving by the heavy-hitters who carry the major financial water in nearly every congregation.
  • Zoning boards and municipalities that have been frustrated for years will leap at the chance to convert tax-free church buildings into potential sources of tax revenue.

In general, many churches have become a bit too comfortable in this world and a bit too eager to worship in temples rather than tabernacles, if you catch my drift. This economic downturn will expose the priorities of these congregations and their members. The onerous mortgages for multi-million dollar expansions will tap the resources and the generosity of many congregations, preventing them from funding missionaries, Christian day-schools, charitable work, and ministry programs. You will hear cries about religious freedom and persecution, especially related to the last point listed above, but in many ways these churches will simply be reaping what they have sown.

The good news? “Those whom I love I rebuke and discipline. So be earnest, and repent.”