Foreclosing the Faith: Are Church Foreclosures the Next Crisis?

One chilly Sunday morning, amid the height of the subprime crisis in early 2009, I found my way to a church service in the heart of the Midwest. The church, known as a “megachurch” and one of the largest in the region, was typical of most churches its size. There was free Starbucks coffee, a television screen in virtually every direction, and loud music pumping into the halls. As the service began, I was mesmerized by a thundering chorus of singers and an eighteen-piece band which made me feel as if I were at a concert. The performance was immediately followed by the entrance of a happy young man who spoke about the importance of giving and commissioned the ushers to take up the “tithe and offering.” This was followed by a few more songs, and then the Senior Pastor emerged. He opened his sermon by speaking about the church’s ongoing building project – at which he expressed great excitement. From the response of the audience, I could tell that most were in agreement with the new building plan and were eager to hear details about its progress. Then, the pastor began showing pictures of the groundbreaking party and some random video of some construction workers in action.

Soon, the sermon moved from the topic of the church’s building campaign to a topic that was on most people minds: the crumbling economy. The pastor carefully attempted to relieve his flock’s concern about the future of the economy by making the statement: “We are not in a recession, and we are not going to be in a recession.” He then continued with an arrogant tone: “And if America does enter a recession, I simply refuse to participate in it.”

Since 2007, I have traveled around the country urging people about the dangers that await America’s economy which has been built largely upon debt. During this time, I have witnessed several examples of such similar denial by church leaders.

Because the illusion of prosperity fooled even America’s best and brightest, not only are church building campaigns around the country suffering, church buildings themselves are being foreclosed upon.

A few months ago, a review of the filings in the Thomson Reuters Westlaw legal database showed foreclosure proceedings against U.S. churches have nearly tripled since December 2007, when the recession began. This is a troubling statistic because, as history and the banking industry demonstrate, church foreclosures have virtually been non-existent in the past.

Then came this weeks Wall Street Journal report that Since 2008, nearly 200 religious facilities have been foreclosed on by banks. Analysts and bankers say hundreds of additional churches face financial struggles so severe they could face foreclosure or bankruptcy in the near future.

The roots of this new church foreclosure phenomenon are two-fold.

One, just like Americans have become enslaved by trying to “keep up with the Joneses”, so too have America’s pastors tried to keep up with new technologies. Their need for cash to subsidize their technological upgrades and their anticipated expansion brought them to the bankers. Secondly, during the days of the housing bubble, bankers were flush with cash to loan and were confident in the repayment ability and the overblown growth projections of America’s churches. Because churches have been traditionally ultra safe loan prospects, the banking industry did not bat an eye at loaning money to churches.

Many of today’s churches who have based their growth models on cheap loans and a “build-it-and-they-will-come” approach are facing gargantuan debt loads, lower investment returns, and weak donations due to the economic crisis. In fact, according to research conducted by the Barna Group, more than half of U.S. churches claim to have been financially impacted by the recession, with one church in six cutting staff.

Before you believe this church foreclosure crisis is growing uncontrollably, think again. Fortunately, most of America’s 335,000 churches carry little or no mortgage debt, and meet in buildings that were paid off long ago. However, this does not mean that these mortgage-free churches did not take on heavy debt loads in order to grow. The current (church-growth) model has left many of our nation’s church heavily indebted in their quest for “mega-church” status. With that being said, the current trend in church foreclosures may be just the beginning of a debt tidal wave heading towards America’s churches. As we know, our nation’s current economic crisis is far from over, and its corresponding real-estate crisis is still causing major problems with many believing that 2011 will be the worst year yet. We will continue to monitor this story as it develops, as this trend could become one of the most damaging in recent church history.

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