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More and more U.S. church buildings being foreclosed upon

By Catholic Online (NEWS CONSORTIUM)
March 12th, 2012
Catholic Online (www.catholic.org)

Banks are now foreclosing on more and more U.S. churches in record numbers. Lenders are increasingly losing patience with religious facilities that have defaulted on their mortgages. The recent church foreclosures represent a new wave of distressed property seizures triggered by the 2008 financial crash. As a result, more banks have become unwilling to grant struggling religious organizations forbearance.

LOS ANGELES, CA (Catholic Online) - Since 2010, 270 churches have been sold after defaulting on their loans. According to the real estate information company CoStar Group, 90 percent of those sales coming after a lender-triggered foreclosure.

In 2011, 138 churches were sold by banks alone. This is an annual record, and there is no sign that these religious foreclosures are abating. In contrast, there were only 24 church foreclosures in 2008, with only a handful in the decade before.

Church foreclosures have hit all denominations across America, with the small to medium size houses of worship being affected the worst. Many of these institutions have ended up being purchased by other churches.

The highest percentage has occurred in some of the states hardest hit by the home foreclosure crisis such as 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," Scott Rolfs, managing director of Religious and Education finance at the investment bank Ziegler says.

Church defaults are different from residential foreclosures. Most of the loans for churches are not 30-year mortgages, but rather commercial loans that typically mature after five years when the full balance becomes due immediately.

It is common practice for banks to refinance such loans when they come due - but these institutions have become increasingly reluctant to do so due to pressure from regulators to clean up their balance sheets, Rolfs says.

"A lot of these loans were given when the properties were evaluated at a certain level in 2005 or 2006," Rolfs says. "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 behind 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.

After the 2009 financial crash, many churchgoers lost their jobs, donations plunged - frequently along with the value of the church building.

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