The Dwarves proceeded to found and inhabit great halls within the mountains: Belegost and Nogrod in the Blue Mountains, Khazad-dûm under the Misty Mountains, and unknown halls in the East. Tolkien gave no detail on the eastern places of awakening beyond this vague hint, but presumably they lay somewhere in the vast regions of Rhûn assuming they too were in mountain ranges, the Red Mountains or the Mountains of the Wind are possible locations from the canonical maps. It was said that the two eastern locations lay at least as far from Mount Gundabad as Gundabad itself lay from the Blue Mountains, and perhaps even further. Besides Durin, who awoke beneath Mount Gundabad in the Misty Mountains, the other Fathers awoke in pairs: two beneath the Blue Mountains in the West, two at an unknown location in the East, and the last two at another unknown location in the East. Six of the fathers awoke with a fellow Dwarf-mother, but Durin, the eldest, woke alone. The Seven Fathers of the Dwarves awoke around one hundred years after the Elves. Still, Ilúvatar would not permit these 'children of his adoption' to walk Middle-earth before the Elves, his own firstborn Children, so he set the Dwarves to sleep beneath the mountains until such time as he saw fit to reawaken them following the coming of the Elves.

So Aulë repented and told Ilúvatar that he could do with the Dwarves as he wished, including destroy them - however, Ilúvatar recognised Aulë's contrition and pure intentions, and decided to bestow fëar upon the newly created Dwarves, transforming them into true sapient beings. Of course, when Eru Ilúvatar heard about this, he was none too impressed. Unfortunately, it was not within his power to create sapient life, and thus the Dwarves he created had no fëar (souls, spirits) of their own, instead being simple reflections of their maker's will. So he made the Dwarves in secret under the mountains of Middle-earth. Instead, they were created by Aulë, who, not wanting to wait for the Children of Ilúvatar to be made, decided to make a race that he could teach his lore and crafts to. The Dwarves, unlike Men and Elves, weren't made by Eru Ilúvatar.

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