Banksters foreclosing on churches in record numbers

by 10 Mar 2012

(Reuters) - Banks are foreclosing on America's churches in record numbers as lenders increasingly lose patience with religious facilities that have defaulted on their mortgages, according to new data.

The surge in church foreclosures represents a new wave of distressed property seizures triggered by the 2008 financial crash, analysts say, with many banks no longer willing to grant struggling religious organizations forbearance.

Since 2010, 270 churches have been sold after defaulting on their loans, with 90 percent of those sales coming after a lender-triggered foreclosure, according to the real estate information company CoStar Group.

In 2011, 138 churches were sold by banks, an annual record, with no sign that these religious foreclosures are abating, according to CoStar. That compares to just 24 sales in 2008 and only a handful in the decade before.

The church foreclosures have hit all denominations across America, black and white, but with small to medium size houses of worship the worst. Most of these institutions have ended up being purchased by other churches.

The highest percentage have occurred in some of the states hardest hit by the home foreclosure crisis: California, Georgia, Florida and Michigan.

"Churches are among the final institutions to get foreclosed upon because banks have not wanted to look like they are being heavy handed with the churches," said Scott Rolfs, managing director of Religious and Education finance at the investment bank Ziegler.

Church defaults differ from residential foreclosures. Most of the loans in question are not 30-year mortgages but rather commercial loans that typically mature after just five years when the full balance becomes due immediately.

Its common practice for banks to refinance such loans when they come due. But banks have become increasingly reluctant to do that because of pressure from regulators to clean up their balance sheets, said Rolfs.

"A lot of these loans were given when the properties were evaluated at a certain level in 2005 or 2006," Rolfs said. "Banks have had to reappraise the value of these properties, whether it's a church or a commercial office building. Values have gone down, so the loans cannot continue in the same form."

The factors leading to the boom in church foreclosures will sound familiar to many private homeowners evicted from their properties in recent years.

During the property boom, many churches took out additional loans to refurbish or enlarge, often with major lenders or with the Evangelical Christian Credit Union, which was particularly aggressive in lending to religious institutions.

Then after the financial crash, many churchgoers lost their jobs, donations plunged, and often, so did the value of the church building.

CONGREGATIONS IN TROUBLE

Solid Rock Christian Church near Memphis, Tennessee, took out a $2.9 million loan with the Evangelical Christian Credit Union at the beginning of 2008, to construct a new, 2,000 seat, 34,000 square-foot building to house its growing congregation.

In the middle of construction, the economy crashed. The church raided its savings to finish the project, but ended up defaulting on the loan.

The ECCU foreclosed and put the church up for auction.

 

Read full article from Reuters

COMMENTS

  • by Michael Royce | 3/10/2012 5:31:12 PM

    I have specialized in the marketing of church buildings for about 10 years now. Churches are downsizing and some are upsizing. The lower the price of the church building the faster it will sell. Church buildings buyers are looking for a sanctuary that will hold their membership plus some. They also are concerned about the number of parking spaces and church buildings must have a kitchen and hopefully a fellowship hall or it may not sell . Central air is a plus too! Number of classrooms and office space is important. What I have noticed is if the church is not ministering to the youth, they will eventually have to close their doors. What may stop a church from selling is the lack of financing being available. Financing of churches come and goes. One year it is available and another year it is very hard to find financing. Closing cost can be quite high. Many of the smaller churches have a hard time coming up with 20%-30% down. Sometimes we need financing where the buyer puts 10% down, the seller carries a second mortgage and the buyer obtains a 60% mortgage from a bank . It helps if the seller will also pay the buyer's closing cost.
    I have sold church buildings from $14,000 to a million dollars. Financing is always the hardest part to get resolved.

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