Foreclosing on churches

The housing market woes are having a big impact also on houses of worship, as banks are increasingly foreclosing on churches:

(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.” . . .

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.

“We are still fighting this,” a church spokesman told Reuters. “We have filed for bankruptcy to stop this foreclosure and to restructure our debt.”

via Banks foreclosing on churches in record numbers | Reuters.

Though the article says that small and medium size churches are most affected–there are more of those–the example is of a megachurch.  My impression is that lots of big congregations may have become over-extended in building their big “campuses.”  Again, the problem is not so much failure to make payments on  a conventional mortgage but having to make a “balloon payment” after a few years, only to find the decrease in the value of the property makes refinancing impossible.  I didn’t realize that churches could go bankrupt.

Have any of your churches had problems like these?

About Gene Veith

Professor of Literature at Patrick Henry College, the Director of the Cranach Institute at Concordia Theological Seminary, a columnist for World Magazine and TableTalk, and the author of 18 books on different facets of Christianity & Culture.

  • Michael B.

    A lot of churches have the attitude that a lot of people have — that they deserve a mcmansion. When my parents grew up, the only type of people who had these really big houses were doctors and other rich people. I recall once visiting a church in my cousin’s family — it was very beautiful and comfortable — air conditioning, nice pews, plenty of room, everything…and the preacher announced they were knocking the entire church down to build a new one. Never mind that there are Christians in the world suffering from malnourishment, do they just assume that their funds will just stay as high as they’ve always been?

  • Michael B.

    A lot of churches have the attitude that a lot of people have — that they deserve a mcmansion. When my parents grew up, the only type of people who had these really big houses were doctors and other rich people. I recall once visiting a church in my cousin’s family — it was very beautiful and comfortable — air conditioning, nice pews, plenty of room, everything…and the preacher announced they were knocking the entire church down to build a new one. Never mind that there are Christians in the world suffering from malnourishment, do they just assume that their funds will just stay as high as they’ve always been?

  • Danny

    Worse than the financial payment. The itching ears payment is due every week so that the cash bearing goats won’t wander to another wolf. Obviously, that’s a broad statement. I like Dave Ramsey’s teaching that churches shouldn’t go into debt on a building.

  • Danny

    Worse than the financial payment. The itching ears payment is due every week so that the cash bearing goats won’t wander to another wolf. Obviously, that’s a broad statement. I like Dave Ramsey’s teaching that churches shouldn’t go into debt on a building.

  • Patrick Kyle

    Years ago I worked for a famous televangelist. They got caught in the cycle of ‘build to keep growing.’ They recently declared bankruptcy to the tune of several hundred million dollars.

    The bible is pretty clear on the subject of debt, but our culture deafens us to its message.

  • Patrick Kyle

    Years ago I worked for a famous televangelist. They got caught in the cycle of ‘build to keep growing.’ They recently declared bankruptcy to the tune of several hundred million dollars.

    The bible is pretty clear on the subject of debt, but our culture deafens us to its message.

  • Bob

    In our area, I’ve seen churches slowing down expansions and I know churches that have been trying to sell are having a tough time.

    Just more fallout from the Great Recession, really. Churches should be thankful the guvmint says they don’t have to pay taxes — who knows how much worse things would be if that were true.

  • Bob

    In our area, I’ve seen churches slowing down expansions and I know churches that have been trying to sell are having a tough time.

    Just more fallout from the Great Recession, really. Churches should be thankful the guvmint says they don’t have to pay taxes — who knows how much worse things would be if that were true.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    I agree with Michael B.

    The buildings are way too big for their congregations. They are playing the Field of Dreams game: “If you build it, they will come.”

    Obviously, churches need to do some upkeep, patch the roof, etc. But you can’t spend millions you don’t have, and furthermore you should not because it is not good stewardship.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    I agree with Michael B.

    The buildings are way too big for their congregations. They are playing the Field of Dreams game: “If you build it, they will come.”

    Obviously, churches need to do some upkeep, patch the roof, etc. But you can’t spend millions you don’t have, and furthermore you should not because it is not good stewardship.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    “Churches should be thankful the guvmint says they don’t have to pay taxes — who knows how much worse things would be if that were true.”

    Wouldn’t make much difference. Churches operate at a loss generally. No profits means there is nothing to tax. FWIW the SPCA doesn’t pay tax either. The SPCA saves local government a ton of money by doing a job that someone would have to do if the SPCA didn’t do it. So, it is a win-win. In saner times, people in government realized that houses of worship fulfilled an even more important function as they aided parents in rearing children to become law abiding contributing citizens who formed and maintained strong functioning communities. Dysfunction is very expensive for government to deal with.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    “Churches should be thankful the guvmint says they don’t have to pay taxes — who knows how much worse things would be if that were true.”

    Wouldn’t make much difference. Churches operate at a loss generally. No profits means there is nothing to tax. FWIW the SPCA doesn’t pay tax either. The SPCA saves local government a ton of money by doing a job that someone would have to do if the SPCA didn’t do it. So, it is a win-win. In saner times, people in government realized that houses of worship fulfilled an even more important function as they aided parents in rearing children to become law abiding contributing citizens who formed and maintained strong functioning communities. Dysfunction is very expensive for government to deal with.

  • DonS

    I would hope that financial institutions, particularly Christian ones, like the ECCU, would work very hard with churches that are current on their payments, but have reached a balloon milestone, to re-finance the loan so that the congregation can continue in the building. That would seem to be an obligation of Christian brotherhood for a congregation that has managed its finances well, but is simply caught up in the times.

    As for those churches that are in default, well there is no reason they should be exempt from responsibility for the contract they signed. In general, in any church board position I have held, I have opposed the notion of a church taking on significant debt, even for a building, because of stewardship issues and because offerings are usually the first to suffer in hard times. If mortgage debt cannot reasonably be avoided, as was the case one time, we structured it to ensure that we would be able to pay off the mortgage during the initial five year period, so that we would avoid the need to re-finance.

  • DonS

    I would hope that financial institutions, particularly Christian ones, like the ECCU, would work very hard with churches that are current on their payments, but have reached a balloon milestone, to re-finance the loan so that the congregation can continue in the building. That would seem to be an obligation of Christian brotherhood for a congregation that has managed its finances well, but is simply caught up in the times.

    As for those churches that are in default, well there is no reason they should be exempt from responsibility for the contract they signed. In general, in any church board position I have held, I have opposed the notion of a church taking on significant debt, even for a building, because of stewardship issues and because offerings are usually the first to suffer in hard times. If mortgage debt cannot reasonably be avoided, as was the case one time, we structured it to ensure that we would be able to pay off the mortgage during the initial five year period, so that we would avoid the need to re-finance.

  • formerly just steve

    Meanwhile, a local Catholic diocese bought Robert Schuller’s Crystal Cathedral for a cool $57 million. Apparently, not everyone is hurting for cash.

  • formerly just steve

    Meanwhile, a local Catholic diocese bought Robert Schuller’s Crystal Cathedral for a cool $57 million. Apparently, not everyone is hurting for cash.

  • CRB

    The world, flesh and devil continue to attack those who preach the gospel and so it shall be unil the return of our Lord Jesus Christ.

  • CRB

    The world, flesh and devil continue to attack those who preach the gospel and so it shall be unil the return of our Lord Jesus Christ.

  • Grace

    DonS @7

    “In general, in any church board position I have held, I have opposed the notion of a church taking on significant debt, even for a building, because of stewardship issues and because offerings are usually the first to suffer in hard times.”

    Very good advice. The church, its pastor and elders, should be wise stewards of the money they are intrusted they have been intrusted with.

  • Grace

    DonS @7

    “In general, in any church board position I have held, I have opposed the notion of a church taking on significant debt, even for a building, because of stewardship issues and because offerings are usually the first to suffer in hard times.”

    Very good advice. The church, its pastor and elders, should be wise stewards of the money they are intrusted they have been intrusted with.

  • Grace

    Sorry, the last sentence jumped around.

  • Grace

    Sorry, the last sentence jumped around.

  • Bob

    sg,

    Are you aware that churches don’t pay property taxes? And of course they wouldn’t pay tax on a “profit” — they’re NONPROFIT!

    If you don’t think property taxes aren’t an insigificant expense, especially but not just for larger churches…well, get a clue.

  • Bob

    sg,

    Are you aware that churches don’t pay property taxes? And of course they wouldn’t pay tax on a “profit” — they’re NONPROFIT!

    If you don’t think property taxes aren’t an insigificant expense, especially but not just for larger churches…well, get a clue.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    Bob, if they started to collect property tax from non-profits, there would be a whole bunch of charities that would be run out of business, many of which do work that has to be done. If the government had to step in and do what they do, it would cost tons more that they don’t have. I gave the example of the SPCA. So, the local taxing authority could assess them $100k in taxes, which could kill their operations, but the government couldn’t provide those same services for $100k. So, it is a cut off your nose to spite your face proposition. Non-profits provide far more services to the community than they cost in tax exemptions. Churches also provide space for community groups that could not afford to pay for them. So, I guess if having a good community is totally worthless, then they could tax non profits, but I doubt any community would actually vote such a stupid action on itself.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    Bob, if they started to collect property tax from non-profits, there would be a whole bunch of charities that would be run out of business, many of which do work that has to be done. If the government had to step in and do what they do, it would cost tons more that they don’t have. I gave the example of the SPCA. So, the local taxing authority could assess them $100k in taxes, which could kill their operations, but the government couldn’t provide those same services for $100k. So, it is a cut off your nose to spite your face proposition. Non-profits provide far more services to the community than they cost in tax exemptions. Churches also provide space for community groups that could not afford to pay for them. So, I guess if having a good community is totally worthless, then they could tax non profits, but I doubt any community would actually vote such a stupid action on itself.

  • Bob

    But do you agree with me that many churches are saving tens of thousands of dollars in property taxes, thanks to the government?

  • Bob

    But do you agree with me that many churches are saving tens of thousands of dollars in property taxes, thanks to the government?

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    @14

    No.

    They aren’t commercial enterprises. They are built by and for the community.

    Do you agree that kids having a car wash to raise money for a school trip should be taxed? Shall we tax the church bar b q to raise money for a community member to have a transplant surgery?

    Do you live in a community that is less than 100% commercial?

    Do you understand the concept of charitable activity? It is not the same as commercial activity. Commercial activity is taxed. Charitable activity is not taxed. That would be redundant. It is also why we don’t tax the police and fire departments.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    @14

    No.

    They aren’t commercial enterprises. They are built by and for the community.

    Do you agree that kids having a car wash to raise money for a school trip should be taxed? Shall we tax the church bar b q to raise money for a community member to have a transplant surgery?

    Do you live in a community that is less than 100% commercial?

    Do you understand the concept of charitable activity? It is not the same as commercial activity. Commercial activity is taxed. Charitable activity is not taxed. That would be redundant. It is also why we don’t tax the police and fire departments.

  • Bob

    Wow.

    You don’t seem able to admit something that’s a fact?

  • Bob

    Wow.

    You don’t seem able to admit something that’s a fact?

  • Joe

    Bob – for your analysis to have any merit you would need to look at the public services carried out by the churches, figure out the cost of providing those services through the gov’t and then compare that to “lost” tax revenue.

  • Joe

    Bob – for your analysis to have any merit you would need to look at the public services carried out by the churches, figure out the cost of providing those services through the gov’t and then compare that to “lost” tax revenue.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    Bob, would it please you to have Christian churches and only Christian churches pay property taxes? So the Jewish Community Center, Little League, the SPCA, Planned Parenthood, Rotary Club, mosques, buddhist temples, and all other non profits would all be exempt, but Christian churches would have to pay tax. Is that where you want to go?

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    Bob, would it please you to have Christian churches and only Christian churches pay property taxes? So the Jewish Community Center, Little League, the SPCA, Planned Parenthood, Rotary Club, mosques, buddhist temples, and all other non profits would all be exempt, but Christian churches would have to pay tax. Is that where you want to go?

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    “You don’t seem able to admit something that’s a fact?”

    What fact?

    What is your basis for wanting to tax non profits that work for the community?

    Why should we tax community service?

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    “You don’t seem able to admit something that’s a fact?”

    What fact?

    What is your basis for wanting to tax non profits that work for the community?

    Why should we tax community service?

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    Let’s just make something clear about local taxes. They are to provide services to the community like police, fire, roads, schools, etc. So, we all pay property taxes and fees. So, a citizen who rents or has a house pays tax and a commercial business pays tax. Now these folks want a better community, so they give to the SPCA and the Baptist church. Those groups serve the community. Taxing them, just double taxes their supporters. Now those who don’t support them still get the benefit without contributing. It is purely voluntary to donate to those groups, but you can benefit without contributing. By what rationale should they be taxed? They only give to the community. Why should we tax people for providing free services to the community? It makes no sense.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    Let’s just make something clear about local taxes. They are to provide services to the community like police, fire, roads, schools, etc. So, we all pay property taxes and fees. So, a citizen who rents or has a house pays tax and a commercial business pays tax. Now these folks want a better community, so they give to the SPCA and the Baptist church. Those groups serve the community. Taxing them, just double taxes their supporters. Now those who don’t support them still get the benefit without contributing. It is purely voluntary to donate to those groups, but you can benefit without contributing. By what rationale should they be taxed? They only give to the community. Why should we tax people for providing free services to the community? It makes no sense.

  • Bob

    ‘What fact?’

    I’ll try one more time.

    You don’t seem to be able to focus on this:

    churches are saving tens of thousands of dollars in property taxes, thanks to the government.

  • Bob

    ‘What fact?’

    I’ll try one more time.

    You don’t seem to be able to focus on this:

    churches are saving tens of thousands of dollars in property taxes, thanks to the government.

  • formerly just steve

    Bob, in order to realize any type of savings, don’t you first have to have an obligation?

  • formerly just steve

    Bob, in order to realize any type of savings, don’t you first have to have an obligation?

  • sandi

    sometimes you guys are so childish

  • sandi

    sometimes you guys are so childish

  • Patrick Kyle

    “churches are saving tens of thousands of dollars in property taxes, thanks to the government.”

    This assumes the money belongs to the government and they are ‘allowing’ you to ‘save’ by not taking what is rightfully theirs.

    This is the kind of thinking that allows government to steal by force of law. I suppose I should not be surprised by this, but I am still outraged by it.

  • Patrick Kyle

    “churches are saving tens of thousands of dollars in property taxes, thanks to the government.”

    This assumes the money belongs to the government and they are ‘allowing’ you to ‘save’ by not taking what is rightfully theirs.

    This is the kind of thinking that allows government to steal by force of law. I suppose I should not be surprised by this, but I am still outraged by it.

  • Grace

    24 Patrick Kyle

    The government would probably like to get their hands on the money of the church, they’ve managed to get whatever they can from the public, so they can operate a socialist govenment -

  • Grace

    24 Patrick Kyle

    The government would probably like to get their hands on the money of the church, they’ve managed to get whatever they can from the public, so they can operate a socialist govenment -

  • Michael B.
  • Michael B.
  • rlewer

    Bob,

    Complete the sentence: Churches, court houses, public schools, animal shelters, homeless shelters, national parks, _______, __________, _________,
    __________ do not pay property taxes. Truth is not found in deliberate skewing of the facts.

  • rlewer

    Bob,

    Complete the sentence: Churches, court houses, public schools, animal shelters, homeless shelters, national parks, _______, __________, _________,
    __________ do not pay property taxes. Truth is not found in deliberate skewing of the facts.

  • Grace

    rlewer,

    It’s lost on him. He probably never knew, or dismissed it, so he could focus on churches.

  • Grace

    rlewer,

    It’s lost on him. He probably never knew, or dismissed it, so he could focus on churches.

  • helen

    fjs @ 8
    Meanwhile, a local Catholic diocese bought Robert Schuller’s Crystal Cathedral for a cool $57 million. Apparently, not everyone is hurting for cash.

    With a nice acreage and office buildings. How did the price compare to its last valuation?

  • helen

    fjs @ 8
    Meanwhile, a local Catholic diocese bought Robert Schuller’s Crystal Cathedral for a cool $57 million. Apparently, not everyone is hurting for cash.

    With a nice acreage and office buildings. How did the price compare to its last valuation?

  • Grace

    helen @ 29

    The Crystal Cathedral, much like the large Mormon churches, are not the usual.

    I’m sure you are aware that the vast, vast majority of churches in this country are not cathedrals, nor are they large. Most seat only one hundred to 400 people. Not every church is decked out with artful ceilings, walls, and stained windows, endless offices, etc.

    Even many of the so called ‘mega churches’ are not, by any stretch elegant, or furnished with the latest seating, or decoration.

    Most of us in Southern California, have ignored the Crystal Cathedral for a long time. It’s a façade, that’s all, …. very sad!

  • Grace

    helen @ 29

    The Crystal Cathedral, much like the large Mormon churches, are not the usual.

    I’m sure you are aware that the vast, vast majority of churches in this country are not cathedrals, nor are they large. Most seat only one hundred to 400 people. Not every church is decked out with artful ceilings, walls, and stained windows, endless offices, etc.

    Even many of the so called ‘mega churches’ are not, by any stretch elegant, or furnished with the latest seating, or decoration.

    Most of us in Southern California, have ignored the Crystal Cathedral for a long time. It’s a façade, that’s all, …. very sad!

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    @26 Michael, are you 12 years old?

    I will assume so and be patient and address the two lies in the photo.

    There is something called a homestead exemption. That means if your house is dilapidated you don’t pay tax because the value of your property is below the level of the homestead exemption.

    Second, the temple in the photo doesn’t exist and therefore pays no tax.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    @26 Michael, are you 12 years old?

    I will assume so and be patient and address the two lies in the photo.

    There is something called a homestead exemption. That means if your house is dilapidated you don’t pay tax because the value of your property is below the level of the homestead exemption.

    Second, the temple in the photo doesn’t exist and therefore pays no tax.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    “You don’t seem to be able to focus on this:

    churches are saving tens of thousands of dollars in property taxes, thanks to the government.”

    And you don’t seem to be able to focus on this:

    People who live within the community vote the taxes on themselves and they choose whom they wish to tax. These people aren’t so stupid that they want to tax themselves for giving to and participating in serving their communities through non profit organizations. Get it?

    If you don’t get it, try to find a local politician to enact your proposal to tax churches.

    Good luck!

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    “You don’t seem to be able to focus on this:

    churches are saving tens of thousands of dollars in property taxes, thanks to the government.”

    And you don’t seem to be able to focus on this:

    People who live within the community vote the taxes on themselves and they choose whom they wish to tax. These people aren’t so stupid that they want to tax themselves for giving to and participating in serving their communities through non profit organizations. Get it?

    If you don’t get it, try to find a local politician to enact your proposal to tax churches.

    Good luck!

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    Bob, do you understand the concept of representative government?

    If the Congress ended deductions for charitable donations, churches would not be hurt much but all the other non profits would drop like flies because most givers are religious and will give to the temple first. Those who aren’t religious are far less motivated to give when they won’t get to deduct it. So, regular non profits will lose from both sources while churches will see some loss, but far less than other non-profits.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    Bob, do you understand the concept of representative government?

    If the Congress ended deductions for charitable donations, churches would not be hurt much but all the other non profits would drop like flies because most givers are religious and will give to the temple first. Those who aren’t religious are far less motivated to give when they won’t get to deduct it. So, regular non profits will lose from both sources while churches will see some loss, but far less than other non-profits.

  • Michael B.

    @Bob

    “churches are saving tens of thousands of dollars in property taxes, thanks to the government.”

    Well that’s true. But it would be more precise to say that the rest of us are paying their taxes for them. And while this is outrageous, I would think the scandal with young boys should be far more outrageous, and they pretty much dodged that bullet.

  • Michael B.

    @Bob

    “churches are saving tens of thousands of dollars in property taxes, thanks to the government.”

    Well that’s true. But it would be more precise to say that the rest of us are paying their taxes for them. And while this is outrageous, I would think the scandal with young boys should be far more outrageous, and they pretty much dodged that bullet.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    @34

    That gay priests raped boys tells you a lot about the Catholic church but absolutely nothing about gays.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    @34

    That gay priests raped boys tells you a lot about the Catholic church but absolutely nothing about gays.

  • Michael B.

    @35

    Don’t you mean pedophile priests? When they rape little girls, it’d be kind of misleading to call them “heterosexual”. Every time I think you can’t say anything more ignorant, you go and completely redeem yourself.

  • Michael B.

    @35

    Don’t you mean pedophile priests? When they rape little girls, it’d be kind of misleading to call them “heterosexual”. Every time I think you can’t say anything more ignorant, you go and completely redeem yourself.


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