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Did religion cause real estate crash?
November 12th, 2009, 2:09 pm · 86 Comments · posted by Jon Lansner
Atlantic magazine has a story with a twist on a possible factor in the great real estate crash I hadn’t seen discussed before: Religion! A tease for the story says …
America’s mainstream religious denominations used to teach the faithful that they would be rewarded in the afterlife. But over the past generation, a different strain of Christian faith has proliferated — one that promises to make believers rich in the here and now. Known as the prosperity gospel, and claiming tens of millions of adherents, it fosters risk-taking and intense material optimism. It pumped air into the housing bubble. And one year into the worst downturn since the Depression, it’s still going strong.
The Atlantic article (CLICK HERE) centers on Pastor Fernando Garay of Virginia, as a symbol of churches where money is part of the gospel preached …
I had come to Charlottesville to learn more about this second strain of the American dream—one that’s been ascendant for a generation or more. I wanted to try to piece together the connection between the gospel and today’s economic reality, and to see whether “prosperity” could possibly still seem enticing, or even plausible, in this distinctly unprosperous moment. (Very much so, as it turns out.) Charlottesville may not be the heartland of the prosperity gospel, which is most prevalent in the Sun Belt—where many of the country’s foreclosure hot spots also lie. And Garay preaches an unusually pure version of the gospel. Still, the particulars of both Garay and his congregation are revealing.
Among Latinos the prosperity gospel has been spreading rapidly. In a recent Pew survey, 73 percent of all religious Latinos in the United States agreed with the statement: “God will grant financial success to all believers who have enough faith.” For a generation of poor and striving Latino immigrants, the gospel seems to offer a road map to affluence and modern living. Garay’s church is comprised mostly of first-generation immigrants. More than others I’ve visited, it echoes back a highly distilled, unself-conscious version of the current thinking on what it means to live the American dream.
One other thing makes Garay’s church a compelling case study. From 2001 to 2007, while he was building his church, Garay was also a loan officer at two different mortgage companies. He was hired explicitly to reach out to the city’s growing Latino community, and Latinos, as it happened, were disproportionately likely to take out the sort of risky loans that later led to so many foreclosures. To many of his parishioners, Garay was not just a spiritual adviser, but a financial one as well.
I’d suggest you read the entire story (CLICK HERE) before issuing judgment, but we’ll give you the fourm — and a voting booth — to share your thoughts!
Real estate trends:
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There is a huge and growing following for the leftist philosophies known as ‘something for nothingism’ and ‘vote yourself rich with some Obama bucks’, which are similar to the ‘the Government owes me a living’ belief systems.
These forms of Government worship have the foundational beliefs that ‘the Government is here to help you’, and ‘the Government can fix this’.
You can’t blame the left or the right for misguided Religious beliefs.
The Right wing created this mess and Left is only making it worse.
Say good by to the middle class
So Fannie Mae and Freddie Mac (MBS’s) along with the government agencies and Federal regulations imposed by the community reinvestment act had nothing to do with it.
They had a very small part! It was actually the deregulation that created the huge sub prime market that Phil Gram got passed and Bil Clinton signed that created this monster. Then Wall St. fell in love with a simple risk formula that allowed them to market bundles of home loans as “securities” and we know where that went. That formula they loved was created by a Chinese National working in the US at the time and Wall ST used it over the the objections of their own experts who were saying that it did not include all the variables- sadly they were proven right.
Fannie and Freddie were not doing 150% of value sub-prime APR loans with interest only payments for the first three years, it was the independents and Wall Street. They accounted for over 95% of the toxic loans, not Fannie or Freddie.
The real issue is greed, back in the 60-70s a company and investors looked at long term health as 3, 5 even 10 years down the road and not as the next quarterly P&L like a lot of companies do today. Another thing was companies promised you a “fair and equitable” return on investment and not “superior return and growth.” Not only do Companies need to start thinking about long term returns but so do investors, I would much rather receive 4% return annually over several years than 10% for a couple of years followed by a melt down that makes the company insolvent.
There is plenty of blame for both parties but the screams of look at Freddie and Fannie they caused this, is wrong. Yes to much regulation is bad nut we have just experienced that not enough regulation is just as bad. The problem is finding the balance.
Total Free market Capitalism and Communism both share the same fatal flaw, neither factors in man kinds greed!
the claim that the community reinvestment act had more than an inconsequential influence in inflating the housing bubble has been refuted up, down and sideways. get your facts right before you pop off, popcorn.
http://www.businessweek.com/investing/insights/blog/archives/2008/09/community_reinv.html
Some of the folks writing above would like to suggest that the leftist policies which aggressively coerced people into houses with mortgages that were MUCH more than they could EVER afford . . . didn’t have ‘significant effect’ on the Ponzi scheme.
DID Y’ALL HAVE A NICE NAP? (for the last few years?)
As of 2008, Fannie Mae and the Freddie Mac owned or guaranteed about half of the U.S.’s $12 trillion mortgage market. (Did I bring up CRA? – Nope.)
There is hardly any use trying to help people “getting your facts straight” if y’all can’t read. Maybe you listen to a video? (I’ll pick some short ones .. . attention span issues and all for you nappers, I know).
Fannie and Freddie are indeed at the root of this catastrophe. This ponzi scheme was triggered AND provided with a foundation . . . by providing loans to people who couldn’t repay them (even in good times). However, I doubt you are capable of accepting this fact. Did it affect other areas of finance? Obviously . . . but to deny the root cause is a guaranteed way to continue and prolong a problem.
http://www.youtube.com/watch?v=_MGT_cSi7Rs&feature=PlayList&p=D69D0878312FC08D&index=0
http://www.youtube.com/watch?v=heuHTGDjvqc&feature=related
http://www.youtube.com/watch?v=8vJcVgJhNaU&feature=related
http://www.newsweek.com/id/151722 <- caution, reading required
http://www.youtube.com/watch?v=9p4inuSaO9M&feature=related
Mr wackytimes: Mr Pressman’s transparent argument is thoroughly refuted in the comments. No points for either of you.
What are you going to do when 8 yrs from now we are hundreds of billions in debt from Obama useless programs, are you still going to be blaming the right? Grow up and take some responsibility, we may have had a right president but we also had a left congress and senate.
Well, yes, we still will be blaming the right - we’ll still be paying for the two wars they started, the financial disaster they caused through deregulation, and probably cleaning the last of the teabag militias out of their spider holes with C4 and flamethrowers.
This is so true, but travels back many decades in certain clases of people and more so in certain dense population areas of the United States.
Let’s be really, really clear: you can believe whatever kooky thing you want to & be as greedy as you possibly can be but if there is no easy money being passed out indiscriminately by banks & mortgage companies, you can pray all you want but you’re not getting anything.
For that you can thank the Federal Reserve.
By the way, it doesn’t take religious beliefs to throw every one into a buying frenzy when money is artificially cheap. That’s a pretty universal response. So yeah, utter hogwash!
Totally agree with the first paragraph but don’t see how it’s all the fault of the Federal Reserve. The rest of the federal government - starting with congress - utterly failed to properly regulate the lending industry. Everyone was so happy to be winning the lottery with their house no one wanted to put the breaks on.
Brakes. I hate that.
True, but where do you thinkCongress and previous administrations, Republican and Democrat, went to for advice regarding regulation of the financial markets? Mr Greenspan, AKA “the Fed”. He was the one continually saying “there’s no problem”.
Ron had it right; the emphasis in large corporations and financial institutions went from long-term stability and strategic planning for 3, 5 and 10 years ahead to “how can I pump up my bonus in the next quarter”.
Fax,
Stop blaming the borrowers. They were not the problem! Even now, the number of defaults on these mortgages is up to maybe 10%. That means 90% of the people who took out these loans are still paying them off. The problem was:
- pooling these mortgages together and selling of shares in that pool
- then counting these as assets
- then linking their value to derivatives which assumed around a ridiculously low 4% default rate
- then artificially inflating their value on the books of the financial banks who were issuing them
- of course all of this is going on while lenders are lying in radio and TV ads to bring in customers, then lying to them or misrepresenting the product. Are you seriously going to blame someone for not reading all of the legalese while a broker/salesman is hurrying them along and “explaining” the papers to them? By the time the closing documents come, the borrower has a completely different idea of what is in the product than what is really there.
What I am waiting for is for more borrowers to catch on to the legal requirement that a bank that wishes to foreclose on a home must produce an actual, real live note. Fact is, they outsmarted themselves, because under the pool system, they cannot produce a note because there is no clear owner. One bank lawyer actually tried to tell a judge in Ohio that he was not sophisticated enough to understand the complexities of modern finance! Needless to say, the judge ruled “no note, no foreclosure.” Of course it is being appealed, but if the banks want to get by on loopholes, they cannot be surprised when their customers do as well.
As for the prosperity gospel, these people are disgusting in their twisting of scripture. The worst of the bunch are the Crouches. But blaming this for the bubble, even in part? Again, do not blame the borrower - see above again.
Yup, the old produce the note is typically a stall tactic.
http://www.huliq.com/2818/77786/produce-note-will-it-save-your-house-foreclosure
Just as the rich rule the poor, so the borrower is servant to the lender.
Proverbs 22:7 NLT
Yes,,,, the Rich also employ millions and take risk.. as the employed complain what they are given.
Yep - a CEO who destroys a company, fires thousands of employees and then skates off to another megabuck job while collecting a giant compensation package has “risked” a whole lot.
“God will grant financial success to all believers who have enough…”
there… fixed it for you
Just another jive ass, no more easy money as an LO so he starts a church to dodge taxes and now has a theory on the “bubble”. All that happened was everybody had the opportunity to get rich quick and only a few though to put a few bucks away instead of going all in.
We reap what we sow.
In my next life I’m going to come back as one of these snake oil salesmen preachers like Rick Warren. Get fat and rich preaching the good word.
Why wait, when you can achieve your dream of being ‘fat’ in this life? Achieve that dream, start chow’n bro!
(Besides, there is strong evidence that in your NEXT life . . . if you come back, it will be as a literate person.)
Gee, your so witty.
He punked you…
Please no snake bashing. Snakes are always getting a bad rap. You should always watch your step and a rattlesnake will give you a warning. Can’t say that is always true with preachers.
Hear-hear. Man is the only animal that kills for sport. Boy, are we dum.
You must not be a cat owner.
True men of God are ALWAYS persecuted. In this country the persecution comes not from governments and jackbooted soldiers, but from the spiteful words of the ignorant and the envious. Rick Warren is the most honorable, honest, and generous people I know and he has mountainous amounts of personal integrity. When you give 90% of your income to charity and do not take a salary for doing your job, then you can comment on this.
Actually, I can comment on anything I choose. And from what I’ve read, much of the “persecution” over the years has been commited by various religions, including Christianity.
I can’t comment on Rick Warren, as I have never met the man. But he doesn’t appear to be hurting much financially. I’m also curious; if he doesn’t take a salary, what income is he giving 90% of to charity?
His books. He’s a writer too. “The Purpose Driven Life” is one of the best sellers of all time.
It’s not that hard to give 90% of your income to charity when 10% of your income is more than most people make. Warren spreads hatred and divisiveness and will be remembered as an embarrassing clown.
As opposed to you spreading nothing but good cheer. BTW, how many millionaires give 90% of their earnings to charity and work for free again?
Tom, I dare you to walk the walk that Rick Warren walks. My guess is you don’t have the guts to put up so how about you shut up.
I see he has you convinced.
Tom, give 90% of your income to charity, any charity, and then you can talk. He’s not getting rich at the expense of his followers as you imply.
Yeah, but if you were like Rick Warren you would have to live your life with poor ethics and morals…
Jon you should have another theme for your blog: Instead of “Really?” you could have one called “Oh, Come On!”.
This hogwash about blaming religion and Latinos for the crash would be a good first candidate.
Bubbles come from greed, fear, and herd behavior. Then, they pop. That’s it, no more.
“Bubbles come from greed, fear, and herd behavior.”
All the hallmarks of good religious doctrine.
Anybody want to guess the politics behind the Atlantic magazine?
I’ve always found it somewhat humorous that Jesus essentially said rich people are mostly going to hell, but all these wealthy people think they will not be the one. Maybe you should trying taking a camel through the eye of a needle. Christianity in America today really has very little to do with what Christ actually taught.
One could argue that according to the Bible, the “prosperity gospel” crowd is essentially worshipping Mammon. Or in other words, they’re worshipping the devil…
The Christains I know take their income, multiple by 2.5 and that is the the cost of their house. They don’t impress people by buying a car they cannot afford. They don’t go on cruises they can’t afford. Their credit balance cays zero. Maybe that is why they are so happy.
You don’t have to be a Christians to know how to use your money and still be happy.
I ‘m happy an my faith is in knowing that someday everything will come to and end.
While it is possible or even likely that the prosperity gospel contributed to the crash as the article points out, that is NOT the gospel. Its more likely that the prosperity gospel appeals to those likely to magical thinking and get something for nothing behavior.
In the Old Testament God did make promises to Abraham and his descendants that included material blessings.
In the New Testament however is not about material prosperity. James talks about not treating a rich man better than a poor man and how often the rich were the oppressors, etc. Jesus said that in the world His followers would have tribulation.
There were those in the New Testament who were believers who seemed to be prosperous, but nowhere are they set up as an ideal to be rich.
God is not a vending machine, much as a wise parent is not a vending machine. Instead both use wisdom in dealing with requests.
Sometimes when someone persistently pursues wealth and asks God for it, He may grant it but give leanness to their souls.
The prosperity teachers seem to be elevating prosperity as a goal to be sought above seeking God’s will.
Nice post.
The article is misleading in that it talks about the prosperity gospel proliferating and it makes it sound as though it is taking over. It talks about the largest churches teaching that, but yet the figures it gives show that it is the minority still and hopefully forever.
Its not biblical, not is it realistic. I’m all for positive thinking, but that does not solve all of life’s challenges such as death. There the true gospel shines with comfort and hope.
The prosperity gospel, something I and others have called “Name it, claim it,” OR “You possess what you confess,” is not gospel at all.
It’s actually been around longer than a generation. Several televangelists preach this message. But like oc4truth says, it’s another gospel, not the one that the Lord and the apostles taught. And it is indeed a slap to the faces of poor people, many of whom are sincere, faithful Christians.
NOW, the housing boom:
I think it had far more to do with easy money, and corrupt mortgage workers than the gospel-prosperity scam artists. Mortgage lenders were approving people for mega-loans that couldn’t even make their first month’s payment.
I think it’s pretty conclusive who caused the housing bust: the feds and corrupt mortgage lenders.
The bible explicitly says “It is easier for a camel to pass through the eye of a needle than it is for a rich man to get into heaven.” I think that’s a pretty blunt statement. Garay is clearly perverting christianity for his own gains, and unfortunately people are dumb enough to fall for it.
How small is the camel and how big is the eye of the needle?
http://farm3.static.flickr.com/2041/1655261839_3fe655b394.jpg
People have already fallen for Christianity, of course they’re primed to swallow whatever additional fiction they are given.
the loard the holy than thow
some who buys property and
hires all the maintanace work
if one choses what I consider a ligit hoard
I mean loard do the work your self earn that
rent money
its good for them loards to work
matt, ya really shud get some schoolin’ and lern ya some proper inglish.
Spellcheck?
The Bible warns specifically about incurring debt (”the borrower is slave to the lender”), cosigning for another person (”He who signs surety for another is a fool,” and quite contrary to this prosperity doctrine warns that people should not trust in their possessions. Job was an exceedingly rich and faithful man but had all his possessions and children taken away in one day.
This doctrine is hogwash, and I don’t think it’s widespread enough to be more than a drop in the bucket towards the craziness of the housing bubble years. Because seriously, it was everyone who was in on it. It’s popular right now to blame investment bankers and Congress for the housing bubble, but the fact is that YOU were responsible. YOU bought that house at a ridiculously high price and took out a loan you knew you couldn’t repay to do it. And because of people like YOU who became obsessed with this groupthink idea that housing was “going straight up forever baby!” we got into this mess.
Don’t blame Christianity for your poor choices.
Well said, Quigley!
I remember an add on the radio for a home loan company. The tag line was “House prices have doubled on average every 10 years.” Now we all live in OC and prices got up there for a nice home that is cheap in the East. I took the $1,000,000 price tag of a home for sale and douled it in 10 years to $2,000,000 then $4mil then $8mil. So if I bought a home this AD was telling me that by the time my mortgage is paid off the home will be worth $8mil. How could I go wrong buying a home? But who do I sell it to in 30 years? This is a middle class home I am talking about. Is the average middle class employee going to be making enough to afford the $11,000 monthly mortgage payment on $8mil. Housing in 2006 was a bad idea for my family.
So…if you don’t get rich you just don’t have enough faith? Talk about stress….
Considering the number of non-Christians that are very wealthy, I’m not sure how these “prosperity gospel” evangelists reconcile this with their beliefs.
From what I’ve seen, it’s primarily those doing the preaching that are getting rich rather than their congregations.
You’re assuming that most evangelists are troubled by facts that are contrary to their beliefs. That’s probably a mistake… :)
Zzzz. This is nothing more than grandstanding or scapegoating. It’ didn’t cause the problems but in some cases I think it added to it. They are just trying to find something to point at since pointing at the government has yielded nothing.
Oh pleeeeease
Shocked. I am just shocked!
What a joke this is. Let me break down the story here. Some preacher teaches prosperity (which I think is a total deception against God) and since he does it in an area where the foreclosure rates are high… there must be a relationship. What a joke.
I might argue that the reason that there are so many foreclosures are because there is too much sun on the people and the fact that too much sun can cause cancer, must be the reason that peoples brains are fried and they ended up being snookered into saying yes to loans they could not afford.
I say it is the sun’s fault and not the preacher (the proof is that most of the high foreclosure rates are in the SUN belt states)… Of course, if one would just apply a bit of logic… the US Congress and Mr. Barney Frank might have a bit to do with the issue, but why pull back the curtain on the wiz.
What a joke.
God has nothing to do with the pursuit of a BMW, liposuction or bigger breasts than your neighbors wife has.Jesus dosn’t care if you must have designer clothes or stay in that five star hotel.The road to hell is paved with the Real Housewives of Orange County.
LOL!!!!
chuckconners said: “The road to hell is paved with the Real Housewives of Orange County.”
If only. Then they might serve a useful purpose!
It’s sad when people use God as a means to getting rich. The Bible clearly states that “the LOVE of money is a root of all kinds of evil.” (I Timothy 6:10) Jesus addressed greed & the issues of wanting to get rich in Matthew 6. I think people have strayed from obeying the Bible and have created their own form of religion. Don’t blame TRUE Christianity for bringing down the housing market. Jesus was homeless and if you read the New Testament people died for the cause - their goal was not to live in mansions - their home was in heaven. The American Dream and the Bible have no connection to each other whatsoever.
Interesting, there were two Loan Brokers and a priest that were Mexican Nationals arraigned in San Diego for pushing predatory loans to Latinos at a church. They would leave fliers on car’s and have vigils stating that God is looking down on them and has provided them with a chance to buy a house. Way to manipulate your own people, illegals.
Two loan brokers and a priest: Have not heard that joke before but I am sure it is laughable.
Oh, I understand. You are saying the if someone is Latino, they must be an illegal alien. No? Oh then just people from Mexico are always illegal aliens? No? Then you are just a garden-variety racist, right. Ok, I get it now. Thanks.
This is nothing more than another modern attack on religion, especially Christianity by the liberal left. It’s meaningless attacking similar to the attack on the Jews by the Nazi’s. It’s bizarre that The Atlantic would be taking on this kind of propaganda story telling. And it’s shameful. But since liberals don’t understand the importance of shame, it will no doubt go unheeded.
Well, maybe if Christianity would stop sponsoring terrorism, people would be nicer.
There is definitely some truth to this article. I know someone who bought a house and decided he wanted a bigger house. So he built a huge house without selling the first home. He is now stuck with 2 houses he can’t afford. When asked what he was going to do he responded, “God will provide.” God won’t make money magically appear in your bank account to cover your stupid decisions.
People need to take responsibilities for their actions and not look to others to bail them out.
Religion contributes to stupidity.
Stupidity contributed to the housing bubble.
Since Religion is only one of the many causes of stupidity, it is hardly to blame for the crash.
The greatest blame for the crash goes to those who lied on their credit applications. They knew exactly what they were doing. They took a risk. Many lost.
Also, no matter how stupid someone may be, they are capable of reading that piece of paper in the loan documents that clearly shows their house payment. This is the responsibility of every buyer, not of the regulators or the mortgage companies or the realtors that so many fools want to blame.
Some would say the law contributes to stupidity.
Law_student,
“Religiion contributes to stupidity”. Where is your evidence for that? I’d be interested to hear why you have such an obviously one-sided view of religion.
I would have to assume that by your tone, you are a follower of Dawkins & Hitchens?
Praise Science, right?
Well, it makes people believe that an invisible angry man in the sky watches them masturbate, for a start. I’d say that’s pretty stupid.
A product of the current school system.
Regardless, you are facing a very bad legal market when you graduate. Starting salaries being slashed, summer hiring gone or postponed. Don’t plan on a big salary when/if you get out.
This is really just factually wrong. It was not people lying on their credit applications that caused the crash. It was the finance industry that changed their lending standards without changing their risk calculations. Most of the foreclosures are not people who never had what they said they had - they are people who should not have been approved, people whose circumstances changed and people who got caught by falling prices when they tried to sell. Since the mortgage-backed securities market did not take into account the greater risk, the risk-return ratio was way off. Too many people invested in higher-risk mortgage backed securities and got stuck with losses.
As for “that paper in the loan documents”, with a variable rate mortgage, there is nothing that can tell you what your your payment will be when your loan adjusts and these financial concepts are not really that easy for most people.
Good luck on finals. Remember — IRAC!
What I find interesting is that many of the largest prosperity churches are in Texas, yet Texas real estate did not bubble.
That’s one of the more biased articles I’ve read in a long time. She takes every opportunity to disparage religion in general. She spends a lot of time on a particular small church.
Of course, she cannot resist bashing conservatives in general and Palin in particular::
“Few of Sarah Palin’s religious compatriots were shocked by her messy family life, because they’ve grown used to the paradoxes; some of the most socially conservative evangelical churches also have extremely high rates of teenage pregnancies, out-of-wedlock births, and divorce.”
Of course, Obama and Bill Clinton had the right idea:
“There is the kind of hope that President Obama talks about, and that Clinton did before him—steady, uplifting, assured.”
She completely ignores one of the real causes of the crash: FNMA. They made “sub-prime” loans to people who cound not make the payments. This they did to appease the Democrats, who insisted that they make housing “more affordable”.
She completely ignores the effect of greed: people bought houses they couldn’t afford, hoping to sell them a year or two later at a 100% profit.
It’s a typical Democrat’s strategy: blame everybody and everything except yourself - the real cause of the crash.
this premise is BS. It tries to connect religion to hispanics and claims that this is why hispanics take out risky loans. this has nothing to do with religion. Hispanics consistently take out risky loans and live paycheck to paycheck. this is what makes them a high candidate for foreclosures. although this is a blanket statement, it cuts to the heart of the problem - lack of foresight and planning for the future…
What real estate crash? According to the OC Register all is peachy keen in the OC. All these people talking real estate crash have their heads up they’re bums.
Here’s a list of banks that did not play the “mortgage for all” game.
http://www.ffiec.gov/craratings/default.aspx
Select “Substantial Noncompliance” for the result of banks that did not participate in MBS’s and liar loans.
This must be a new BS in town…Religion??
Well in that case. In my next life I will try to have a house with the two Milano cups (one in eachside) and the vaticano’s doors.
And will sing all day long “O’ Sole Mio”