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<DIV><FONT size=2>I wonder if the below article may have any local
applications.</FONT></DIV><FONT size=2>
<DIV><BR>Wayne A. Fox<BR>1009 Karen Lane<BR>PO Box 9421<BR>Moscow, ID
83843</DIV>
<DIV> </DIV>
<DIV><A href="mailto:waf@moscow.com">waf@moscow.com</A><BR>208 882-7975</DIV>
<DIV>___________________________________________</DIV>
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<LI class="articleSection first"><A
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<LI class=dateStamp><SMALL><FONT size=2>JANUARY 25,
2011</FONT></SMALL></LI></UL><!-- ID: SB10001424052748704115404576096151214141820 --><!-- TYPE: Business --><!-- DISPLAY-NAME: Business --><!-- PUBLICATION: The Wall Street Journal Interactive Edition --><!-- DATE: 2011-01-25 00:01 --><!-- COPYRIGHT: Dow Jones & Company, Inc. --><!-- ORIGINAL-ID: --><!-- article start --><!--
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<H1>Churches Find End Is Nigh </H1>
<H2 class=subhead>The Number of Religious Facilities Unable to Pay Their
Mortgage Is Surging </H2>
<H2 class=subhead>By <A
href="http://online.wsj.com/search/term.html?KEYWORDS=SHELLY+BANJO&bylinesearch=true">SHELLY
BANJO</A> </H2></DIV></DIV>
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<P>ROSEVILLE, Calif.—Residential and commercial real-estate owners aren't the
only ones losing their properties to foreclosure. The past few years have seen a
rapid acceleration in the number of churches losing their sanctuaries because
they can't pay the mortgage.</P>
<P>Just as homeowners borrowed too much or built too big during boom times, many
churches did the same and now are struggling as their congregations shrink and
collections fall owing to rising unemployment and a weak economy.</P>
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<P><A>View Full Image</A></P></DIV></DIV><A><IMG border=0 hspace=0
alt=0124FORCHURCH1
src="http://si.wsj.net/public/resources/images/OB-MA507_0124FO_D_20110124195248.jpg"
width=262 height=174></A></DIV><CITE>Max Whittaker for The Wall Street
Journal</CITE>
<P class=targetCaption>Members of The Family Church at a service this month.
</P></DIV>
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<P>Since 2008, nearly 200 religious facilities have been foreclosed on by banks,
up from eight during the previous two years and virtually none in the decade
before that, according to real-estate services firm <A
class="companyRollover link11unvisited"
href="http://online.wsj.com/public/quotes/main.html?type=djn&symbol=CSGP">CoStar
Group,</A> Inc. Analysts and bankers say hundreds of additional churches face
financial struggles so severe they could face foreclosure or bankruptcy in the
near future.</P>
<P>"Churches are the next wave in this economic crisis," says Rev. Jesse L.
Jackson Sr., president and founder of the Rainbow PUSH Coalition, a non-profit
civil-rights group, who works with pastors around the country to help churches
negotiate better terms with their bankers. </P>
<P>Religious denominations of all kinds have suffered in recent years as
donations have declined, with many Catholic parishes closing and synagogues
merging their congregations. But the property-financing problems have been
concentrated among independent churches, which while seeking to expand lack a
governing body to serve as a backstop to financial hardship. </P>
<P>"Religious organizations may be subject to the laws of God but they are also
subject to the laws of economics," said Chris Macke, senior real-estate
strategist at CoStar. Many troubled churches, he said, are in states such as
California, Florida, Georgia and Michigan, which also have some of the highest
home-foreclosures rates in the country.</P>
<P>In many cases, churches ran into trouble after borrowing to build bigger
houses of worship needed to accommodate growing congregations in once-booming
housing markets.</P>
<P>Pastors Rich and Lindy Oliver decided their Family Christian Center needed
more space after their congregation rose from a few hundred in the early 1990s
to 650 by 2002. The church borrowed $4.2 million and began building a new
1,000-person sanctuary on 11 acres in Orangevale, Calif., including classrooms
and a space for adult learning. </P>
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<P class=targetCaption>Across the U.S., churches are losing their sanctuaries
because they can't pay their mortgage debt. Some borrowed too much or built too
big during boom times and now are struggling as congregations -- and collections
-- shrink.</P></DIV></DIV>
<P>But when housing prices across California began tumbling in 2006, followed by
a surge in unemployment and foreclosures, many congregants moved away, and those
who were left reduced their tithing sharply. Meanwhile, the property, valued at
$8.5 million in 2002 was appraised at just $2.5 million in 2008.</P>
<P>Stretched to the limit, the pastors stopped making payments. "I just told the
bank to take it," Mr. Oliver said. "If you're a church with a piece of property
upside down and no one will refinance the loan or lend you more money, there's
not really another choice but to walk away." </P>
<P>Bankers and lenders typically are reluctant to "foreclose on God" and seek to
work out deals with churches. But none proved possible in the Olivers' case.</P>
<P>These days, Mr. Oliver said his church, renamed The Family Church, was "doing
what the rest of America is doing—we're cutting back and simplifying." In
November, the Olivers raised $700,000—not nearly enough to rescue the previous
church—from donations and personal loans from church members and used it to
lease a former furniture store in a strip mall in Roseville, Calif. </P>
<P>Traditionally, lenders considered churches good risks because of the weekly
cash flow generated by tithing, as well as the moral compulsion felt by most
pastors to pay down debt. </P>
<P>Like many churches, Mr. Oliver used bond financing, not a straight mortgage,
to fund construction. Historically, churches wanting to build turned to their
governing bodies or to specialized lenders that originated fixed-rate 25-year to
30-year mortgages. During the real-estate boom,</P>
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width=318 height=270> </DIV></DIV></DIV>
<P>But during the real-estate boom, regional and community banks attracted
churches with lower rates on shorter-term loans. At the same time, some bond
underwriters began offering churches more money up front if they issued
so-called compound-interest bonds. In such cases, churches often paid nothing
until the bonds came due years later, but then had to pay both the principal and
accrued interest, which often doubled the amount they owed. </P>
<P>Many such bonds come due in the next few years. But with property values down
and cash in short supply, many churches won't have the funds to payand will have
trouble refinancing. "In 2011 and the next couple of years, we're going to see a
big maturity wall hitting these churches," said Scott Rolfs, head of
Wisconsin-based investment bank Ziegler and Co.'s Religion and Education
practice. </P>
<P>Many churches have also been upended by plain mortgages. Vineyard Christian
Fellowship in Sacramento took out a $1.9 million mortgage to acquire a $2.3
million 18,000-square-foot property in 2004 that included a church and two
retail spaces. Johnny Zapara, the pastor, had refinanced his own home for
$400,000 to make a down payment and expected to pay most of the $17,000 monthly
payment with income from retail tenants. </P>
<P>When one of the tenants went out of business and a new one couldn't be found,
Vineyard subsidized the payments for two years. Eventually the church ran out of
money. and couldn't refinance because the value of the property had fallen
sharply.The lender foreclosed earlier this month.</P>
<P>"A building does not make a church. We will find a way to continue," Mr.
Zapara said.</P></DIV></DIV></DIV></DIV></DIV><BR></DIV></FONT></BODY></HTML>