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Faith-based lending: A mortgage with a message

By   |  Posted in First-Time Homebuyers

The proverb that "birds of a feather flock together" might explain why some homebuyers and homeowners gravitate toward so-called faith-based lenders when they want to get a new mortgage.

If you hold deep religious beliefs or respect those who do, you might want to give your business to someone who shares your faith or incorporates religious precepts into his or her business practices.

However, as a mortgage borrower, you should realize that just because a mortgage lender shares your religious beliefs doesn't mean he or she can give you a better deal on your loan.

Faith-based marketing

Donna Frye, broker/owner of Christian Real Estate and Christian Mortgage in Phoenix, Ariz., specializes in loans to churches, ministries and Christian-based nonprofit organizations as well as real estate and mortgage brokerage services for individuals.

Since she target-markets her commercial services to these organizations, she says she's sometimes invited to give sales presentations to their employees or members as well.

"Sometimes we're talking to the church about a loan for remodeling or buying or selling (property)," she says, "and they'll have a married Bible study (group) that would like to talk about real estate or mortgages."

Faith-based lenders use religious messages in their marketing communications to identify themselves to like-minded people or others who are curious about their faith.

You might encounter Bible verses or personal testimonies on websites; you might be asked whether you'd like to pray about your mortgage, or you might be told--repeatedly--that you "have a free ticket to heaven and all you have to do is accept it," to quote Fyre's favorite phrase.

Likewise, people of other faiths might use similar messages or practices that pertain to their particular beliefs.

Faith-based lending is fair lending

Beyond those trappings, however, faith-based lending doesn't differ much from any other sort of lending. The loan products, guidelines and processes are virtually identical, regardless of the religious conviction.

This lack of differentiation is due largely to government regulations and constraints imposed by the securitization of mortgages, explains David Estridge, a spokesperson at Christian Community Credit Union in San Dimas, Calif.

Moreover, faith-based lending isn't exclusive to borrowers who share the lender's faith.

In fact, it's illegal in the U.S. for lenders to discriminate against borrowers on the basis of their religion or certain other protected characteristics.

That said, a credit union is by definition a membership-based organization, and one organized around religious beliefs might require a statement of faith as a condition of membership. As Estridge explains, membership eligibility is considered prior to credit qualifications.

"The credit union, by nature, is a membership organization, and our field of membership is based on faith, church membership and family," he says. "But once you're a member, the credit underwriting standards are all standard for the mortgage industry and regulated--those aren't faith-based."

One exception: In rare cases, the credit union can "push the ratios just a little bit," Estridge says, for longtime members who are well-known to the organization. That might help some borrowers qualify for a mortgage with less income relative to their debt or a higher home value relative to their down payment or equity.

Due diligence

Frye suggests that as a faith-based broker, she's honor-bound to be honest with her clients. Christians, she says, "shoot from the hip and tell the truth." In her experience, that's a selling point in some borrower's minds.

"I've had people call me from every walk of faith," she says, "and they all say the same thing: if you're bold enough to put (your beliefs) out there, I'm going to expect you to treat me according to your faith--honesty and integrity over and above and beyond what I'd expect from someone I would meet on the street."

Nonetheless, you should always be wary of any promise or proposal that sounds too good to be true, even if the lender shares your religious beliefs.

The Federal Trade Commission has warned consumers to watch out for so-called affinity scams in which perpetrators associate themselves with a religious or ethnic community or other group to gain trust as a precursor to fraud.

Callie Briese, a spokesperson for Thrivent Financial for Lutherans, a faith-based credit union in Appleton, Wis., says consumers should do research and due diligence before they work with any organization, regardless of a faith-based aspect.

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