L.A. churches being foreclosed on in record numbers

Lenders have moved in on 59 L.A. County churches since 2008, the Business Journal is reporting. In the first quarter of 2012 alone, six churches have lost their mortgages. The problem is especially prevalent in L.A. because of the high concentration of small churches, and because changing demographics have hurt membership.

The rising defaults are putting pressure on banks and other lenders already contending with souring loans to businesses and homeowners. Broadway Federal Bank, OneUnited Bank and Evangelical Christian Credit Union are among the local institutions that have been hit hard. Broadway, which has been a major lender to area churches for decades, was placed under a cease-and-desist order by regulators amid heavy loan losses, including $10 million last year. Paul Hudson, who recently stepped down as Broadway's chief executive but remains chairman, attributed "the bulk of our problems" to church loans. "Even though in past recessions, churches have weathered it better than other institutions, this one has just been so bad and for so long," Hudson said. "There has been no period like this during my lifetime."

Turns out that easy credit right before the recession resulted in stepped-up borrowing - annual spending on church construction topped at $9 billion before the financial crisis and is now less than $4 billion. After the market meltdown, lower property values left many churches unable to refinance loans.

The troubles have affected even large congregations, most notably the now-bankrupt 10,000-member Crystal Cathedral in Garden Grove, which had to sell its impressive glass sanctuary in February to the Roman Catholic Diocese of Orange. But most of the loan defaults in Los Angeles are occurring in smaller Protestant evangelical churches, which are struggling to keep up with monthly payments amid a sharp decline in tithing, the main source of income for most churches. "Giving is down straight across the board," said Mark Hammond, director of missions for the Los Angeles Southern Baptist Association, which provides support to 175 local churches.

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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
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