There's an interesting article at the New York Times about how a record number of churches are facing foreclosure as the credit crisis seizes every sector of American life. During the real estate boom many churches took advantage of easy credit and expanded. Banks, eager to cash in lent money based on the hope that church membership would grow and as a result donations. But now with a financial crisis, homeowners facing foreclosures, job losses and personal bankruptcy many church members are giving less and hundreds of churches across the country are knee-deep in debt and facing foreclosure.
According to the article:
Historically, churches were wary of debt, and many old-line congregations have owned their buildings free and clear for decades. But borrowing by churches became more common in the 1990s, reaching $28 billion nationwide in 2006, including mortgages, construction loans and church bonds, according to Lambert, Edwards & Associates, a consulting business in Grand Rapids, Mich. New companies and nonprofit organizations focused on church lending sprang up, as did real estate investment trusts and other bundles of church loans, which were sold to investors.
They bundled church loans and sold them to investors and we wonder why these financial "powerhouses" are facing bankruptcy and many homeowners (and apparently churches too) are facing foreclosure. Since when did church loans become big business in the eyes of the financially savvy? Already, 254 churches have been foreclosed on and the numbers of foreclosures are predicted to increase with at least 25% of all churches holding mortgages on their properties. I wonder how many of these church loans are toxic, subprime or adjustable rate mortgages? It is definitely a sign of the times when religious congregations are being evicted from their churches.