Last month, the Federal Deposit Insurance Corporation closed small banks in Illinois and Indiana, increasing the number of U.S. bank failures this year to nine. That's a much slower pace than last year, when 92 banks closed, and a severe drop from 2010's 157. But even with the slowdown, the FDIC expects failures from 2011 through 2015 to cost $19 billion.
Perhaps it's time bankers and more specifically lenders change the way of doing business. And I'm not even talking about dollars and cents; I'm looking at dollars and sense.
Where I serve, we call it the "theology of a loan," which recognizes the inherent God-given dignity of each person we serve as we hope to help turn dreams into reality.
During my lifetime, lenders have become separated from the people who receive their loans. People became accounts with assets and credit ratings, rather than individuals seeking to accomplish hopes and dreams. Banks have viewed husbands and wives as avenues through which their bottom lines could grow, not as couples looking to purchase homes where their families could grow.
The expansion of the Internet has exacerbated the problem. Now, many lenders never even visit with those who take up their loan offers. Lenders are faceless organizations, mere approval emails with in-boxes.
The banking crisis is proof the system no longer works. If it ever did.
At the Baptist Church Loan Corporation, we have been lending differently for 60 years. We believe it's crucial to meet every church we offer a loan. We meet the staff and lay leadership. As a result, we know more than a church's financial situation; we know its hopes and dreams. We become partners in making those hopes and dreams reality.
That takes time and resources, but we believe loans are important enough to make such efforts worthwhile. With the low rates we offer congregations, we may need two years simply to recover the cost of the plane ticket for the visit.
We don't simply get to know our clients; we treat each of them the same—no matter their resources or the size of the loan. In fact, we offer each church the same rate, no matter their funding level. In rare cases when another lender can offer a church a better deal on a loan, we encourage the congregation to pursue the loan with that lender and wish them the best.
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Such a seemingly antiquated and contradictory approach would significantly alter the current lending environment. If lenders and lendees become partners in pursing dreams, when one party fails to hold up its side of the bargain, the reputation of both parties is damaged. When dreams are fulfilled, the viability of both sides grows, and life for both of them expands into new areas.
What I'm suggesting may seem overly idealistic or even impractical. But it's been successful, even when we've decided to give a congregation a loan other lenders wouldn't have approved. In the past four years—the heart of the financial and foreclosure crisis—we've only foreclosed upon one congregation. While lenders nationwide are closing or feeling the pinch of a difficult economy, BCLC has grown in each of the past four years. During that period, our portfolio has gained 14 percent.
It's time for something to change. Maybe that change simply begins with a handshake. It might even be worth $19 billion.
Gerald James is president of the Dallas-based Baptist Church Loan Corporation, the largest Baptist-owned church-lending nonprofit group in the nation.
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