From Religious News Service:
March 19, 2009
By Daniel Burke
(RNS) The headlines make God sound like a deadbeat debtor, the kind of deity who buys an expensive house and quickly falls behind on payments.
”Foreclosures Don’t Spare House of God,” trumpeted the New York Times last December. ”In Hard Times, Houses of God Turn to Chapter 11 in Book of Bankruptcy,” teased the Wall Street Journal the same month.
You’d expect to see `For Sale’ signs on churches across the country. But you probably won’t.
In fact, if you read the raft of high-profile articles closely, they report that a very small percentage of churches are facing foreclosure.
As the Associated Press noted in an article published this month, it’s hard to count exactly how many churches are in trouble because records are scattered throughout county offices nationwide. At the same time, banks don’t like to admit they made bad loans, and churches don’t often cop to being overly ambitious.
But the Wall Street Journal was able to report that “dozens” of churches are listed as delinquent on their loans, according to the newspaper’s search of county records nationwide. At the same time, “most” of the 335,000 churches in the U.S. “carry little or no mortgage debt,” the paper reported.
The New York Times hired a data provider to dig a little deeper and found that 0.31 percent of the 82,441 churches it studied were facing foreclosure.
These sound like small numbers, but its still a big story, according to some bankers.
“There is definitely a trend,” said Dan Mikes, a banker who has specialized in church loans for 18 years at Bank of the West in Walnut Creek, Calif. “Historically, there were no (church) foreclosures.”
Bankers considered churches a pretty safe bet, said Mikes. Passing the plate provides a steady source of income, church budgets are flexible and religious folks pay banks back.
“I compare it to a racehorse and a plough horse,” said Kelly Archer, president of the Church Loans & Investment Trust in Amarillo, Texas. “Church loans have always been the plough horse. They never got the headlines, never were the big kid on the block.”
That all changed in the late 1990s, bankers say, around the same time subprime mortgages and McMansions became hot. Churches competed to keep up with Pastor Jones across the street. They have a café, we want a café. They have a 1,000-seat auditorium, we want a 2,000-seat auditorium.
New banks heard churches were a safe market to dabble in. They over-estimated churches’ growth projections and threw money at them, said Mikes.
A number of churches and banks have blamed declining donations for the foreclosures. But Mikes says churches have weathered similar downturns in the past without going belly up.
And not everyone agrees that donations are down. Just 28 percent of evangelical pastors reported that charitable contributions were significantly lower (10 percent) than their goals in the fourth quarter of 2008, according to study by the Evangelical Council for Financial Accountability.
Historically, economic recessions don’t necessarily mean declining donations, Empty Tomb, an Illinois-based ministry that studies church finances, told the (Ala.) Birmingham News. From 1968 to 2005, church giving declined in only three of the 10 years that witnessed a month or more of economic distress, Empty Tomb said.
Often, it’s personality conflicts, pastor scandals or other headaches that lead to church bankruptcies, scholars say.
While mainline Protestant churches have been losing members for years, they don’t have these bankruptcy problems. There are two reasons for that, said Valerie Munson, an expert on church property law at the University of St. Thomas School of Law in Minneapolis.
Theologically, when mainline Protestants (your Lutherans, Presbyterians, Methodists and other WASPy types) open a chapel or sanctuary, they symbolically give it to God.
“To them, the space itself is dedicated to God and holy,” Munson said. “To place a mortgage on the property—to give a secular bank a business interest in the property—is contrary to that holy purpose to them. It is giving to someone else part of what you have given to God. “
In contrast, evangelicals don’t think about their relationship to God in terms of space itself being dedicated to the Almighty, Munson said. “They are more likely to think in terms of their worship and their mission—if mortgaging a building will serve their mission (how they are using their lives for God) then they are living faithfully.”
At the same time, hierarchical denominations like mainline Protesants usually insist that local congregations hold church buildings in trust for the denomination and cannot mortgage the pews and steeples. In fact, many require permission to lease church buildings for longer than a year, Munson said.
Finally, Roman Catholic dioceses own local parish property. When dioceses themselves go bankrupt, as several have after the clergy sex abuse scandal, the case law becomes even more complicated, Munson said.
But the deeds are in the bishop’s name, Munson said, and they maintain control of the parish—financial and otherwise.
That’s why the foreclosure problem has been mostly confined to small and independent evangelical churches where there’s no diocese, no synod and often no denomination to lend a hand - or a buck.