Just something to think about this Easter when US parishioners stream into church on Sunday.
Reuters reports that a review of filings in the Thomson Reuters Westlaw legal database shows foreclosure proceedings against U.S. churches have nearly tripled since December 2007, when the recession began and that court records show 100 US churches have declared bankruptcy in the last year. Churches took on massive debt to support their growth and building crisis.
As a result, the debt crisis has entered the House of God.
The problem is that many American churches, like other businesses and investors, gambled heavily during the boom years and spent like there was no tomorrow. And as occurred in the housing bubble, new loan makers emerged to take advantage of the church mortgage sector. Traditionally, the churches had relied on smaller community banks with links to a member of their congregation. Loans were often set at a fixed rate and for a set term. But during the boom, predators and loan sharks moved in, crowding out traditionally prudent lenders with too-good-to-be-true-no-questions-asked offers. As a result, there was an unusual boom in church building and real estate speculation, mirroring much of what was going on in the broader economy with the housing bubble.
Reuters reports: "Spending on construction of religious buildings rose sharply in the late 1990s, climbing 70 percent from 1995 to 1999 to an annual rate of $7.3 billion. New building continued to tick up, eventually reaching an annual rate of nearly $9 billion in 2003 before leveling off, according to data from the U.S. Census Bureau. As was the case in the residential housing market, the church property boom was accompanied by the rise of more specialized lending. Church lending was historically done by community banks, which sometimes have ties through a member of a congregation. Loans were often set at a fixed rate and for a set term. The emergence of larger congregations and the rush to build venues to accommodate them encouraged specialized lending that grew more aggressive."
In particular, the crisis has hit non denominational churches which have attracted younger members and families with their array of activities and events, health clubs, meeting rooms, cafes and sports fields. African American churches have been hit hard too as their congregations have suffered higher unemployment.
With US unemployment still at around 9.7% and recovery still some way off, demand for church services will increase. But the ability of many US churches to provide it will evaporate.
no comment untill now