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When the bubble burst: How did we get into the mortgage crisis, and how can we get out?

It’s hard to listen to the news these days without hearing another grim report about the widening mortgage crisis. There is plenty of blame to go around, but only God can help Christians get their financial houses back in order. Many industries and government agencies have played a role in getting us into this mess. Lenders expanded their guidelines so more people could qualify for loans, even if they did not have the means to repay them. This meant that many Americans who once could not have afforded a home loan now would have the American dream — temporarily, anyway.

Even Congress and past presidents believed everyone should own a home and encouraged lenders to loan to lower-income families. A popular saying was, if someone could breathe, they could get a loan. Realtors, appraisers, builders, loan originators, developers and title companies all saw an opportunity to make money. Even homebuyers saw an opportunity to buy a larger house than they had ever imagined; either in hopes of reselling for a profit down the road or just to keep up with the Joneses. As 1 Timothy 6:10 says, “For the love of money is the root of all kinds of evil”.

Many people wandered from their true faith and brought on hardship. A sequence of events contributed to the timeline of these market changes. Some believe it started with the Twin Towers collapse on Sept. 11, 2001.

Shortly after, the federal government cut taxes and sent rebates to Americans, encouraging people to spend more to fight terrorism. Federal Reserve Chairman Alan Greenspan cut the discount rate to 1 percent and announced that adjustable-rate mortgages were a positive choice. Mortgage companies and lenders threw themselves into creative financing, creating adjustable rate mortgages (ARMs), option ARMs, 100 percent financing loans, teaser rate loans, no-document loans and negative-amortization loans. The availability of these new loans created an immediate demand in housing, upgrading into larger homes and buying new construction. The value of homes started to increase rapidly, which led to investors speculating and flipping homes with plans to immediately resell for a profit. This value increase also led to many Americans taking the equity out of their homes with second mortgages to spend the money on unnecessary possessions.

No wonder we are in such a mess! The government has stepped in once again and hopefully will ease the housing and credit crisis by lowering mortgage rates and allowing greater availability of credit for consumers. Lending standards will not ease, though. Fannie Mae and Freddie Mac will keep a close eye on underwriting practices, and fees for borrowers with weaker credit histories will remain in effect. Their primary goal is to increase the availability of mortgage financing while remaining proactive in the processes. Fannie and Freddie are crucial to the turnaround. The consequences of this market will be seen for years to come.

What good will come from all of this? Now is the time to really teach and equip the Church and others regarding financial and biblical stewardship. Americans need to learn how to live within their means and avoid debt, including their mortgage. Our prayer is to see a steady increase in the number of God’s children becoming 100 debt-free by connecting them to area ministries.