faith, hope and bankrupcy

Tabnabs

I always knew christianity was a good business to be in, but some of the figures are astounding. I suppose it's too much to wish for to see that new church in Firhouse being shut down and turned into a proper community resource?

(Reuters) - By the time thousands of parishioners stream into the 3,000-seat Ebenezer AME Church on Easter Sunday, church leaders hope to have something else to celebrate: financial revival.

The congregation, one of America's largest, has been scrambling to raise funds to save the arena-sized sanctuary from potential foreclosure. To that end, it has enlisted national leaders, such as the Reverend Jesse Jackson and Harvard Law School's Charles Ogletree, who was President Barack Obama's law professor.

Thanks to its 10,000-member congregation and connections with business and civic leaders, Ebenezer expects to avoid the fate of a growing number of U.S. churches, which are defaulting on loans, facing foreclosure and even declaring bankruptcy at an unprecedented pace.

"It's happening to virtually every church," said the Rev. Grainger Browning, senior pastor of Ebenezer. "At a recent meeting with the 100 top pastors in the country, it was amazing how all of us were facing some sort of challenge with the banks."

Supercheap, few-questions-asked loans were a temptation even churches could not resist, but now they are paying for their sins as the debt crisis enters the house of God.

Long considered among the safest of borrowers, churches gambled on real estate at a time when credit copiously flowed and lenders were startlingly lax.

But places of worship have since been battered by the economic downturn. Donations have dipped, investment returns have plunged and bank credit is still hard to come by.

"You build it and they will come. It really was true through the years," said Brad Hampton, executive pastor at the Faith Center of Rockford, Illinois. "They like newness," he says of younger churchgoers.

Hampton's megachurch was erecting a new sanctuary that could seat almost 2,000 when his lender refused further credit beyond an initial $4.2 million. The Faith Center, which also has a 48,000-square-foot "life center" that operates various ministries, is being foreclosed upon.

"People call and say 'You're not alone'," Hampton said.

FORECLOSURE FILINGS TRIPLE

Getting a complete picture of the financial health of churches across the country is difficult. But a review of filings in the Thomson Reuters Westlaw legal database shows foreclosure proceedings against U.S. churches have nearly tripled since December 2007, when the recession began, compared with the previous seven years, which included the dot.com bust and economic downturn.

Court records also reveal more than 100 churches have declared bankruptcy in the last year, often in a last-ditch attempt to halt a sheriff's sale. That number could rise fast.

An investigation by a Memphis television station found hundreds of churches in the city fighting foreclosure. Jackson estimates thousands of African-American churches nationwide are in danger of foreclosure, with 200 in Atlanta alone.

Ebenezer AME got into trouble when its cash reserves fell below $750,000, tripping a covenant on its loan.

Its lender, Bank of America, initially insisted that the church hire a consultant, at a cost of $5,000 a day, to keep a watch on its finances, and required cuts to pastoral benefits such as a car allowance. The bank eventually dropped those demands, along with a plan to raise the interest rate on the church's $8.5 million mortgage, so long as Ebenezer AME found another lender to take over the loan.

Other lenders have been somewhat less forgiving. Court records show that JPMorgan Chase & Co relied on a private investigator to compile evidence against Hopewell Baptist Church, which operates out of the former B'nai Jeshurun synagogue in Newark, New Jersey, and is the home of "kosher gospel" music.

The private investigator, according to the court documents, photographed the license plates of everyone who drove up, in an apparent attempt to determine if the church was operating and likely to be collecting rent.

The court ended the church's bankruptcy protection and it is slated for sheriff's sale in April.

Of course, things are not uniformly bleak. In the case of Ebenezer, the Maryland megachurch, its prayers may be answered. The church hopes to finalize a deal with a new lender, Industrial Bank of Washington, DC, to take over the loan this week.

NEW LENDING FUELED BUILDING BOOM

Churches emerged from previous economic downturns relatively unscathed, lenders noted. But the recent recession was preceded by an unusual boom in church building.

Spending on construction of religious buildings rose sharply in the late 1990s, climbing 70 percent from 1995 to 1999 to an annual rate of $7.3 billion. New building continued to tick up, eventually reaching an annual rate of nearly $9 billion in 2003 before leveling off, according to data from the U.S. Census Bureau.

As was the case in the residential housing market, the church property boom was accompanied by the rise of more specialized lending. Church lending was historically done by community banks, which sometimes have ties through a member of a congregation. Loans were often set at a fixed rate and for a set term.

The emergence of larger congregations and the rush to build venues to accommodate them encouraged specialized lending that grew more aggressive.

Evangelical Christian Credit Union, America's Christian Credit Union and Strongtower Financial began to expand rapidly and compete for new business. Some regional and community banks that were nudged out of residential lending by Wall Street banks also discovered lending to churches as a relatively fragmented and inviting business with a history of low defaults.

"They entered the business with an absolute vengeance," said Phil Myers, president of the American Church Mortgage Co. "Five or six years ago there may have been two or three lenders competing on a deal. Now there were five. Those loans are coming home to roost."

Traditional church lenders such as American Church Mortgage Co and Bank of the West found themselves struggling to compete as competitors stretched lending guidelines and dangled ever larger loans in front of church administrators and pastors.

"We often lost business when offering $8 million and someone else would come in and offer $10 million," said Dan Mikes, who heads church lending for Bank of the West.

Bank of the West has zero nonperforming loans to churches, which the bank attributes to its prudent lending guidelines.

Many of the loans made in recent years contained many of the same features that exacerbated the residential real estate crash, such as low-interest teaser rates, securitized loans and balloon payments.

As a result, bad loans are rising rapidly for those lenders that pushed aggressively into church finance. Delinquent loans at the Evangelical Christian Credit Union, which expanded its loan portfolio from about $225 million to more than $1 billion over the last decade, have risen to 7.4 percent of their loans from 3.6 percent a year ago. Until 2007, the lender did not have a loan in foreclosure.

Ministry Investment Partners Co, which finances evangelical churches and purchases loans from the Evangelical Christian Credit Union, reported 13.3 percent of its loans were nonperforming, up from 1.9 percent a year ago.

And in 2008, the Church Mortgage and Loan Co filed for bankruptcy after a third of its outstanding loans were in foreclosure.

As these lenders struggle or disappear, many churches are finding their lifeline of credit has dried up. What is more, the value of many of the buildings and properties owned by churches has fallen sharply, sometimes even below the mortgage used to finance a project, making refinancing almost impossible.

"It's an unprecedented time," Mikes said.

CUTTING STAFF AND REDUCING PROGRAMS

Even the richest, most established churches have not been immune to this economic downturn. A study by the researcher Barna Group found more than half of U.S. churches said they have been hurt by the recession, with one church in six cutting staff.

The Episcopal Church in the United States, one of the wealthiest U.S. denominations, is feeling the pinch from a $1 billion loss in the combined investment portfolio for 2008, according to Kirk Hadaway, the head of congregational research for the Episcopal Church.

Yet the financial woes appear to be the most severe among nondenominational churches which were also among the fastest growing over the past decade. Many churches attracted younger members and families by offering an array of activities and events, and began building centers with health clubs, meeting rooms, cafes and sports fields.

The new-look houses of worship were often located along busy commercial strips on major thoroughfares, and bear little resemblance to the steepled churches that dot rural New England.

"Churches were trying to fill many roles," said Faith Center's Hampton. "They were trying to fill cultural gaps."

Without the support of a large national organization, some churches felt the need to take on debt to support their growth and building. Now, many are cutting staff, reducing programs and reining in expenses. "Churches have downsized staff, moved from full-time to part-time clergy, because the revenues are not coming in," said Scott Thumma, a sociology of religion professor with the Hartford Institute for Religion Research.

One-time emergency giving campaigns can also fill a short-term gap. Rick Warren, who delivered a prayer at President Barack Obama's inauguration, recently raised more than $2 million during a one-weekend emergency appeal for funding.

And churches have given up immediate plans for building. "They've decided to rent movie theaters or contract with local hotels to have multiple services," rather than build a new building, Thumma said. "They might have a worship service with a live band but the main sermon is from a live feed. That's becoming more common because of the economy."

African American churches in particular appear hard hit. Their congregations have suffered higher unemployment, and often the churches provide more services.

"It's devastating," Reverend Jackson said. "They are closing down services to seniors. They are closing down feeding programs. Demand for services are on the rise and the ability to provide services is decreasing," he said.

Jackson is organizing a campaign against church foreclosures. "It's our largest single institution," he said, "the greatest cash-flow institution."

(Reporting by Tom Hals; Editing by Jeffrey Cane and Jim Impoco and Claudia Parsons)

http://www.reuters.com/article/idUSTRE63020J20100401

PDN

The financial numbers sound large, but are mostly in line with what you should expect if you've bought a house recently.

For example, if people were paying €200,000 for a bog-standard 3 bedroomed semi with room on the driveway for one car, how much do you think it should cost to build an auditorium for hundreds? To give you an idea, my own church is building a 1200 seat building (at present we have to split the people into 3 services to squeeze them into our current 450 seat building). The local council insists on us providing 220 parking spaces - and the only way you can squeeze that onto a 2 acre site is to build a multi-storey carpark (so add a million onto the project cost).

Of course traditional churches like Catholicism and Anglicanism have properties that are frequently too big for their requirements - but most of the newer fast growing churches in Ireland have no option but to pay through the nose if they want all their community to be able to gather together in one place to worship.

philologos

Dyflin wrote: »

I always knew christianity was a good business to be in, but some of the figures are astounding. I suppose it's too much to wish for to see that new church in Firhouse being shut down and turned into a proper community resource?

Why is a church not a "proper" community resource?

I mean, if people meet and worship together, isn't that a proper community?

By the by, if I may take you up on this. You are a key poster in the Paganism forum. If there was a place of pagan worship, would you regard it as not being a "proper" community resource?

bnt

I dunno ... I'd imagine that, if you're going to run a church as a business, you ought to run it like a business i.e. proper accounting, risk management etc, with an extra dose of ethics. After all, aren't church leaders supposed to occupy the moral high ground, and deal only with ethical businesses?

I mean, look at one lender named in that article: American Church Mortgage Company (ACMC), who say they "specialize in underwriting and distributing first mortgage secured bonds issued by not-for-profit religious institutions, primarily churches".

The term "mortgage secured bonds" should set off alarm bells. We're talking about the same "mortgage-backed securities" that brought down Lehman Brothers and are at the heart of the sub-prime mortgage crisis. Are they doing this all themselves? No, they are "affiliated" with American Investors Group, Inc. (American) who have been "providing investors throughout the country with fixed-income, mortgage-secured investment opportunities".

Translation: ACMC offers mortgages to church organizations, then American repackages those mortgages and re-sells them to investors. During the boom years, ACMC/American sat in the middle and raked in the profits from the resale straight away, while passing the risk on to investors. ("Hey, I'm investing in a church, doing good while making money!") They loaned to not-for-profits, but that doesn't mean they are a not-for-profit!

The more mortgages they sold, the more they made, so they were not choosy about who they sold to: any one (or any church) could get a huge mortgage to expand. Then, when the churches (understandably) had difficulty repaying and default, the mortgage-backed securities become "toxic assets". Investors in them are lucky to get 10c on the dollar return. (This is not an exaggeration - read about the NPR "Toxie" experiment, for example: they bought a "toxic asset" to follow how it worked.)

In other words: churches took out huge expansion mortgages because they could get them, which was because ACMC and others offered them, which was because the brokers made huge profits on them while transferring the risk on to investors like Lehman Brothers. I guess being "not for profit" doesn't exempt a church from being greedy, eh? :cool:

Tabnabs

Jakkass wrote: »

By the by, if I may take you up on this. You are a key poster in the Paganism forum. If there was a place of pagan worship, would you regard it as not being a "proper" community resource?

If the mods wish to move this to the appropriate forum I'd be happy to discuss

Dades

PDN wrote: »

The local council insists on us providing 220 parking spaces - and the only way you can squeeze that onto a 2 acre site is to build a multi-storey carpark (so add a million onto the project cost).

Can't they just park in the local catholic church car park and walk? They should have plenty of space these days. :pac:

robindch

Jakkass wrote: »

Why is a church not a "proper" community resource?

Because the object of a church (or indeed, just about any religious group) is to benefit itself, not the community that supports it.

I'd perhaps have more time for these places if they were non-prophet.

philologos

robindch wrote: »

Because the object of a church (or indeed, just about any religious group) is to benefit itself, not the community that supports it.

I'd perhaps have more time for these places if they were non-prophet.

The church itself constitutes a community. The church, ecclesia being a group of people.

Churches may have buildings, but ultimately it is a community of believers in Jesus Christ who are there to encourage believers to grow more and more in knowledge of the Gospel and equip people to live it out in their daily lives.

The church is a community as all those who are a part of it, are under a common Lord.

I can understand how you might undermine that robindch. I am still puzzled as to why Dyflin can argue that a church isn't a legitimate community as a pagan. Which is really the reason why I asked the question.

Zillah

Ebenezer expects to avoid the fate of a growing number of U.S. churches, which are defaulting on loans, facing foreclosure and even declaring bankruptcy at an unprecedented pace.

Were I a traditional religious person I might argue that this is God's justice for those indulging in ludicrous excess. If you look at the absurd super-churches that have been popping up in the US with their light shows and high-tech showmanship its very easy to understand why this is all happening. What ever happened to humility? All you need is a space large enough for people to gather in comfort and for them to be able to hear the priest/preacher, right?

I'd regard this in the same way I regard the Vatican's approach to "relics": Unnecessary focus upon material possessions. If you insist on having beliefs that are inconsistent with reality you could at least try and be internally consistent guys.

strobe

Zillah wrote: »

Were I a traditional religious person I might argue that this is God's justice for those indulging in ludicrous excess. If you look at the absurd super-churches that have been popping up in the US with their light shows and high-tech showmanship its very easy to understand why this is all happening. What ever happened to humility? All you need is a space large enough for people to gather in comfort and for them to be able to hear the priest/preacher, right?

I'd regard this in the same way I regard the Vatican's approach to "relics": Unnecessary focus upon material possessions. If you insist on having beliefs that are inconsistent with reality you could at least try and be internally consistent guys.

*put's on devils advocate hat* Ahh but some of these super churches have the largest attendences and followings of any new churches. If god in his wisdom has decided that expensive light shows and high tech showmanship is what is required to spread his message and save more souls who are we to question his divine inspiration? If that new $8,000 pyrotechnic display helps lead even one lost soul to forge a personel relationship with Jesus then surely it is money well spent?

Zillah

Ah, but how many souls might be lost to the true message of love and human dignity because their prayer service is reduced to shallow showmanship?

PDN

Zillah wrote: »

All you need is a space large enough for people to gather in comfort and for them to be able to hear the priest/preacher, right? .

No, wrong.

A church is a community that believes that we worship God with our creative powers. This is what inspired the majority of the great art that hangs in our museums, and much of the greatest music that has ever been written.

Therefore, when the community meets together, they want to express their worship in music. That often means having a band and a choir, along with the necessary sound system, a building with reasonable acoustics, video projection so everyone can see the words to the songs etc.

Most of the churches that have been constructing new buildings are predominantly young (eg in our church less than 2% of the congregation are over 50) so most of the members desire to worship God with drama, dance etc, and preachers often illustrate their messages with video (the modern equivalent of Jesus telling parables).

Also, space has to be provided for children's Sunday School while the adults are listening to the preacher - and any facilities involving children costs loads of money. So add on a few classrooms etc.

Local authorities are very stringent with churches when it comes to conforming to bylaws etc. We had to spend over €250,000 just getting through planning permission (partly because the local RCC priest launched a campaign to stop us) and at least a third of our building costs will be conforming to the various fire regulations, safety requirements etc.

Now, if churches borrow more money than they can afford to repay and face foreclosure, then you may argue that they deserve what they get. In my opinion they deserve the same mockery or scorn as any Joe Soap in Dublin who took on a big mortgage on a house and now, because of the recession, can't make the payments.

But, from my experience, no church deliberately spends money extravagantly on a building when it could be done much cheaper (after all, most of us have to give an annual itemised account to our members each year).

Dave!

robindch wrote: »

Because the object of a church (or indeed, just about any religious group) is to benefit itself, not the community that supports it.

I'd perhaps have more time for these places if they were non-prophet.