Ministry Today – Serving and empowering church leaders

Three-quarters of the nation’s 335,000 churches are virtually or completely mortgage-free. But for many of those in the minority carrying a loan on their property, what were already tight times—due to decreased giving from financially stretched churchgoers—are quickly becoming tough times.

A recent report by First American CoreLogic discovered that hundreds of churches are facing foreclosure, almost all of which were affected by the mortgage boom in recent years that saw church-issued mortgages increase 50 percent from 2002 to 2005. According to the U.S. Census, spending on church construction rose from $3.8 billion in 1997 to $6.2 billion in 2007. A separate study found that church borrowing as a whole peaked at $28 billion nationwide in 2006, including mortgages, construction loans and church bonds.

“There have been too many churches with a ‘build it and they will come’ attitude,” says N. Michael Tangen, executive vice president at American Investors Group, a church lender in Minnetonka, Minn. “They had glory in their eyes that wasn’t backed up with adequate business plans and cash flow.”

Those loaning churches money can attest to the bubble bursting. In its 45-year history, the Evangelical Christian Credit Union in Brea, Calif., had foreclosed on only two churches. This year it has served foreclosure papers to seven of its 2,000 members, and its president says the company expects to add to that number in the coming months. Another church lender, Church Mortgage & Loan Corp. of Maitland, Fla., has already foreclosed on 10 church properties in the past two years and, as a result, had to file for Chapter 11 bankruptcy protection in March.

“Some of the mentality that you saw taking hold of the residential marketplace probably shifted into the church,” says Dan Mikes, executive vice president of the church banking division of Bank of the West. “Lenders loaned far too much, they loaned into lofty projections of future growth, and they just saddled the churches with far too much debt.” [, 12/23/08;, 12/26/08]

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