More Churches Face Foreclosure

Written by: Steve Cook   Sun, October 18, 2009 Beyond Today's News, Foreclosure Situation

 

If you want to buy a church, you can choose from hundreds of religious buildings for sale, many of them foreclosures and distress sales.  Churches, parsonages, church schools and other properties are becoming victims of the same sour national economy that has devastated secular real estate.

The latest congregation to lose its home is the First Assembly of God in Naples, Fla.  Work on a new $3.2 million multimillion-dollar family worship center stopped cold more than a month ago when contributions shrunk by two-thirds.  Some in the congregation are homeless. Many others don’t have jobs.  Some who made pledges for the new building have changed their mind, fearing the church will be lost to the bank in foreclosure.  Now foreclosure proceedings are underway.

The Naples church may be quickly followed by the Progressive Baptist Church of Temple Hills, Md., which owes more than $2.86 million on its mortgage and $1.88 million in overdue state and federal taxes for its 11.7 acre campus, which includes a church, a house and several school buildings.

Historically, economic recessions don’t necessarily mean declining donations. From 1968 to 2005, church giving declined in only three of the 10 years that witnessed a month or more of economic distress. However, things are much worse during this recession. A recent study by Barna Research found that 20 percent of American households have reduced their giving to churches, which has hurt church finances in a way not experienced in past recessions. As a result, some churches are struggling and church lenders are reporting more problems this year than they have experienced over the past several decades. More churches than ever are losing their buildings.

Easy credit and overbuilding also contributed to the boom and bust in religious real estate. Once church foreclosures were extremely rare, because churches have long been considered good credit risks. As a result, credit has been easy to come by in the past and church construction jumped from $3.8 billion in 1997 to $6.2 billion in 2007. Now, as construction financing dries up and collections dwindle, many congregations find themselves without places to worship.

Before this recession, churches almost never lost their buildings to foreclosure and even in today’s environment; lenders are much more likely to take over a commercial property than a church. Because of churches’ non-profit status, originators rarely sell church mortgages into secondary markets. Lenders tend to work closely with troubled congregations and will go to great lengths to see a church through hard times. The Naples church, for example, has temporarily won a 20-day extension to respond to the foreclosure action, which could give it more time to raise money to fight it. The bank said basically they don’t want to own a church.

The scope of the problem is difficult to measure, Most of America’s 335,000 churches are well established, building costs paid off long ago. The situation among a minority of congregations, however, is certainly worse than it was last March, when the New York Times found that 0.31 percent of the 82,441 churches it studied were facing foreclosure.

However, not everyone in the religious community considers foreclosure to be a bad thing. Ken Eastburn, pastor of The Well church in Orange County, Calif, left its building in 2005 to become a web of house churches that meet in homes to eat, worship, study and serve together. Eastburn calls The Well’s decision to leave their building “the best thing ever to happen to our congregation.”

“It’s definitely scary for a church to be facing foreclosure,” says Eastburn, “but we want to encourage churches in that situation with a message that sounds crazy, but is solidly biblical: Come on out-the water’s fine.”

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