"Who gives $700,000, 700, 700?" he
called out. One man, a representative for a local bank, raised his finger. The
auctioneer tried in vain to nudge the price up. "Sold!" he cried. St.
Andrew Anglican Church had just been bought by the bank that had started
foreclosure proceedings against it.
"It's probably good for my soul to be taken down a notch," said
the Right Rev. Joel Marcus Johnson, the rector of St. Andrew, after the
auction.
During this holiday season of hard times, not even houses of God have been
spared. Some lenders believe more churches than ever have fallen behind on
loans or defaulted this year. Some churches, and at least one company that
specialized in church lending, have filed for bankruptcy. Church giving is down
as much as 15% in some places, pastors and lenders report.
The financial problems are crimping a church building boom that began in
the 1990s, when megachurches multiplied, turning many
houses of worship into suburban social centers complete with bookstores, gyms
and coffee bars. Lenders say mortgage applications are down, while some
commercial lenders no longer see churches as a safe investment.
"We are seeing more stress
in churches than we have in modern history," says Mark G. Holbrook,
president and chief executive of the Evangelical Christian Credit Union of
Church Mortgage & Loan Corp.
of Maitland, Fla., another church lender, foreclosed on 10 church properties in
the past couple of years. Unable to sell any of them, the company didn't have
the funds to pay more than 400 bondholders the estimated $18 million it owes,
says company lawyer Elizabeth Green. Church Mortgage filed for Chapter 11
bankruptcy protection in March.
Strongtower Financial of Fresno, Calif., says two of its 300 evangelical church
borrowers are in default, compared with only one in the previous 15 years.
Dozens more churches are listed
as delinquent on their loans, according to a search of county court records
nationwide.
Churches were long considered good credit risks, lenders say. Weekly
collections tend to be steady, even during recessions, and churches feel a
moral tug to pay debts. Most of the nation's 335,000 churches carry little or
no mortgage debt, and are based in buildings that were paid off long ago.
But some churches, especially those
not affiliated with major denominations, borrowed briskly to build or expand in
recent years. Spending on construction of houses of worship rose to $6.2
billion in 2007 from $3.8 billion in 1997, according
to the
The 125-year-old
A quarter of the congregants
soon stopped attending church, says Mr. Newman, so weekly collections started
to dwindle. He and the church leaders cut staff and electricity use to save
costs, but in January, facing a foreclosure judgment of $3.3 million, the
church filed for bankruptcy protection. Mr. Newman says the church hopes to settle
its debts and emerge from bankruptcy proceedings in the coming months.
"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 Inc., a church lender in Minnetonka, Minn. "They had
glory in their eyes that wasn't backed up with adequate business plans and cash
flow."
St. Andrew, the recently auctioned
The rector of St. Andrew, Bishop
Johnson, attracted like-minded conservatives who disliked Episcopal
innovations, such as ordaining female priests. In 2005, the church borrowed
$850,000 to buy a much larger space that had once belonged to a Roman Catholic
parish.
The 1868 Gothic revival
structure was large for Bishop Johnson's congregation of 50 people. But the
gregarious Midwesterner, who once raised money for a ballet troupe and
orchestra, said he was confident his ministry and donations would grow.
"I'm well liked, I'm a lucky man," he says he felt at the time. He
wooed real-estate agents, bankers and well-heeled locals -- some of whom didn't
even attend the church -- and received pledges worth $200,000.
Some donors said they were impressed with the bishop's generous food pantry
and help given to local Hispanics. For a time, Bishop Johnson said Mass in
Spanish on Friday nights for workers at a crabmeat processor, and the parish
also offered English classes.
"He served a part of this community that often times
does not get served well," says Lee Denny, president of the local
General Motors dealership. Mr. Denny, an elder in
But expenses mounted. There were mice in the basement and bats in the
belfry. It cost about $45,000 to stanch creeping black mold. Once the local
Catholic parish began saying Mass in Spanish, it drew off most of St. Andrew's
immigrant members. Weekly donations dropped to about $600 from $1,425 three
years ago, says Bishop Johnson. And many of those who had pledged $200,000
toward the mortgage payments told the bishop they needed to delay their gifts,
saying their stock portfolios were down.
Last February, the church couldn't meet its monthly interest payments. The
lender, Talbot Bank, a unit of Shore Bancshares Inc., foreclosed in August,
seeking $950,000, including principal and unpaid interest. It was one of five
properties Talbot foreclosed on in the last two years, but the only church,
says W. David Morse, a vice president at the bank.
At the auction's end, Bishop Johnson shook hands with Mr. Morse.
"These people are not Wall Street bandits, for crying out loud," the
bishop said of his bankers. St. Andrew's congregants will likely stay in the
building for several more weeks while the bank seeks a buyer.
The transaction gave James C. Andrew, the auctioneer, some pause. He was
married in the building in 1997 when it was a Catholic church and his two
children had been baptized there. "I'll probably wind up with coal in my
stocking for Christmas," he said.
Write to Suzanne Sataline at suzanne.sataline@wsj.com
Corrections & Amplifications: St. Andrew Anglican Church
was one of five properties foreclosed on by Talbot Bank of