As thousands of parishioners streamed into the 3,000-seat Ebenezer AME Church in Fort Washington, Md., on Easter, church leaders were hoping to have something additional to celebrate: financial revival.
The congregation, one of America's largest, has scrambled to raise funds to save the arena-sized sanctuary from potential foreclosure. To that end, it enlisted national leaders, such as the Rev. Jesse Jackson and Harvard Law School's Charles Ogletree, who was one of President Barack Obama's law professors.
Thanks to its 10,000-member congregation and connections with business and civic leaders, Ebenezer expects to avoid the fate of a growing number of U.S. churches, which are defaulting on loans, facing foreclosure and even declaring bankruptcy at an unprecedented pace.
"It's happening to virtually every church," said the Rev. Grainger Browning, the senior pastor of Ebenezer. "At a recent meeting with the 100 top pastors in the country, it was amazing how all of us were facing some sort of challenge with the banks."
Cheap, 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 houses 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, the executive pastor at the Faith Center of Rockford, Ill. "They like newness," he says of younger churchgoers.
"People call and say, 'You're not alone,'" Hampton said.
Getting a complete picture of the financial health of churches across the country is difficult. But 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, compared with the previous seven years, which included the dot-com bust and economic downturn.
Court records also reveal more than 100 churches have declared bankruptcy in the past year, often in last-ditch attempts to halt sheriffs' sales. That number could rise quickly.
An investigation by a Memphis, Tenn., television station found hundreds of churches in the city fighting foreclosure. Jackson estimates thousands of African-American churches nationwide are in danger of foreclosure, with 200 in Atlanta alone.
Ebenezer AME got into trouble when its cash reserves fell below $750,000, tripping a covenant on its loan.
Its lender, Bank of America, initially insisted that the church hire a consultant, at a cost of $5,000 a day, to keep a watch on its finances and required cuts to pastoral benefits such as a car allowance. The bank eventually dropped those demands, along with a plan to raise the interest rate on the church's $8.5 million mortgage, so long as Ebenezer AME found another lender to take over the loan.
Other lenders have been somewhat less forgiving. Court records show that JPMorgan Chase relied on a private investigator to compile evidence against Hopewell Baptist Church, which operates out of the former B'nai Jeshurun synagogue in Newark, N.J., and is the home of "kosher gospel" music.
The private investigator, according to the court documents, photographed the license plates of everyone who drove up, in an apparent attempt to determine if the church was operating and likely to be collecting rent.
The court ended Hopewell's bankruptcy protection, and the church's home is slated for a sheriff's sale this month.
Of course, things are not uniformly bleak. In the case of Ebenezer, the Maryland megachurch, its prayers may be answered. The church hopes soon to finalize a deal with a new lender, Industrial Bank of Washington, D.C., to take over the loan.
Churches emerged from previous economic downturns relatively unscathed, lenders noted. But the recent recession was preceded by an unusual boom in church building.
Spending on construction of religious buildings rose sharply in the late 1990s, climbing 70% 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.
Continued: African-American churches appear hard hit
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