No One is Exempt from the Foreclosure Wave Sweeping our Country

No one is exempt to the foreclosure wave sweeping our country, not even churches.  Since 2010, over 270 churches have been sold after defaulting on their loans and going into foreclosure. That number is likely to double or triple this year.

Last year alone, lenders foreclosed on 138 churches.  Compare that number to 24 church foreclosures in 2008.

The church foreclosures have hit all denominations and mostly contained to the small and medium-sized congregations. Some of the foreclosed churches were bought by other churches and in the states hit hardest; California, Georgia, Florida and Michigan.

Banks and lenders haven’t wanted to foreclose on the churches due to the bad publicity they would receive. Recently the lenders have lost patience and gone after the churches in record numbers.

Church defaults are very similar to residential foreclosures except most churches have commercial loans. The commercial loan usually matures in 5 years when typically the bank will refinance when they come due. But bank regulators have pressured banks to clean up their balance sheets so the banks are reluctant to refinance.

The Evangelical Christian Credit Union (ECCU) was particularly aggressive granting loans to churches a few years ago. Many churches took out loans to refurbish, or enlarge their structures.

Many of these church loans were made in 2005 and 2006 when property was evaluated at a much higher level. The property values have gone down, so the loans are ‘called in’. The same factors involving homeowners facing foreclosure have hit the churches in the same manner.

One church, near Memphis Tennessee took out a $2.9 million loan with ECCU in 2008 to build a new 34,000 square foot house of worship to accommodate its growing congregation. During construction, the economy crashed and the church used its savings to finish the project but ended up defaulting on the loan. ECCU foreclosed on the church and put the church up for auction. The church, Solid Rock Christian Church is fighting the foreclosure and auction by filing for bankruptcy and restructuring their debt.

In Boston, Massachusetts, a historic black church founded in 1818 has defaulted on a $1.1 million balloon loan that was due December 2011.  A balloon loan is a long-term loan with a large payment due at the end of the loan.  The pastor of Charles Street African-American Episcopal Church wants to refinance with OneUnited bank, America’s largest black-owned bank and accuses the bank of being unwilling to negotiate.

In Georgia, the historic Flat Rock Church was founded in 1860. The church took out an $850,000. balloon loan with Sun Trust in 2005 to build a new 300-seat addition. The loan became due in May 2010. The congregation was caught by surprise when locks were placed on the doors Sunday morning. The bank foreclosed and the church will be auctioned off next month.

When our economy was growing, people would always pitch in extra money if the church was in a pinch.  Today, more and more congregational members are unemployed and simply don’t have the money to help.

Not even churches can avoid the wrath and greed of the lenders.

I repeatedly hear from the lesser-informed (and fortunate) people who have escaped the housing market crash, “not paying your mortgage is some sort of sin”. Do these same people have a sense of higher morality to pay off these predatory or extravagant loans?

In light of this article, it makes me wonder if these some folks will be singing the same tune?

Keith A. Gantenbein, Jr. is a Colorado foreclosure defense attorney located in Denver and servicing all of Colorado. He also handles bankruptcies, mortgage negotiations, lender liability, real estate, civil litigation, contracts and landlord/tenant. If you think you will be facing foreclosure, or are in the foreclosure process, or have had a wrongful foreclosure, contact Keith Gantenbein at (303) 618-2122 for a one-hour consultation where he will discuss your situation and go over all your options with you.

This article is not intended as legal advice. The opinions of this article are solely the opinion of the author.