April 13, 2010

I would have thought a loan to a church to be a safe investment. But, I guess churches are no different than the people that run them, and years of easy credit and cheap loans have lead churches down the steep hill of excessive borrowing.

Say what?! Churches are defaulting on loans at 3 times the rate they traditionally have! Yikes! That must be worrisome to a lot of lenders.

What makes this even scarier for the lenders, is that Church property loans are often for a high dollar figures, and churches can’t be converted into other uses all that easily. Sure, a few can be converted into lofts, and some are in excellent locations if the buildings are demolished. As such, I would think that a defaulted church would be hard to recover from.

According to Reuters:

“Supercheap, few-questions-asked loans were a temptation even churches could not resist, but now they are paying for their sins as the debt crisis enters the house of God.

Long considered among the safest of borrowers, churches gambled on real estate at a time when credit copiously flowed and lenders were startlingly lax.

But places of worship have since been battered by the economic downturn. Donations have dipped, investment returns have plunged and bank credit is still hard to come by.

“You build it and they will come. It really was true through the years,” said Brad Hampton, executive pastor at the Faith Center of Rockford, Illinois. “They like newness,” he says of younger churchgoers.”

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