Living on a Prayer: Church Foreclosures Skyrocket

By Rich Smith

The Bible tells us that "it is easier for a camel to go through the eye of a needle, than for a rich man to enter the kingdom of God." Foreclosing on his pastor probably doesn't make the trick any easier.

There's a new development in the housing crisis: Foreclosures are hitting houses of worship.

According to a report from Reuters, 2011 was a record year for foreclosures on church buildings. Prior to the Great Recession, bank seizures of houses of worship were rarer than atheists in foxholes, with only a handful of foreclosures occurring in the decade prior to 2008.

That all changed when the mortgage crisis hit.

Just as homeowners in the 1990s and early 2000s rushed to take advantage of rising house values and fatter wallets to spend lavishly on real estate, the real estate bubble encouraged irrational exuberance in the pews. Congregations took out loans to refurbish and enlarge their church buildings. Unfortunately, these loans were not the 30-year fixed mortgages that most of us are familiar with. Instead, churches took out commercial loans -- five-year loans with balloon payments at the end.

The usual procedure was to refinance loans when their balloon payments came due. Problem is, loans predicated on the inflated real estate assessments that prevailed before 2007, once reassessed for possible refis in 2010 and 2011, were found to lack sufficient principal. Banks began turning down refinancing applications, and churches were told to either pay off their loans (i.e., make the balloon payment) or go into foreclosure.

Result: From 2010 to present, bank foreclosures on church buildings have skyrocketed -- 270 foreclosures since 2010; a record 138 foreclosure sales in 2011 alone.

Forgive Them, Father

Loan officers asked about this trend are, not surprisingly, chagrined. As one banker named in the Reuters piece complained: "It is not the practice of the Bank to [use] foreclosure in the absence of good cause. We trust the community will not rush to judgment without full knowledge of all the facts."

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Better pray for a miracle, then. It might make all the economic sense in the world to foreclose on a debtor that's unable to pay its bills. If a debtor can't pay, the logical thing to do is foreclose, resell the property, and try to get back at least part of the money lent. But when a bank does this to a church, it's playing with fire (and brimstone).

Whatever fate may await foreclosing bankers in the afterlife, the perils in the here and now are clear. Foreclose on a family home, and you've made a handful of people angry. Foreclose on a church, though, and you've taken your PR nightmare wholesale. In one step, you've won your bank the ill will of hundreds of congregants -- or more. People who will, in all likelihood, spend the rest of their mortal lives regaling friends, neighbors, and other potential banking clients with the story of how they "will never bank with XYZ bank again -- those guys foreclosed on my church!"

And it gets worse. Say a bank feels it has no choice but to foreclose on a church. What's it supposed to do with the property? Houses are no picnic to sell these days: Who's going to buy a house of worship out of foreclosure?

A Silver Lining

Depending on square footage and nearby foot-traffic patterns, a slightly used church might make an appealing location for, say, a new Starbucks. McMansion shoppers might be another target demographic for the used church market, if the churches aren't too small.

But as it turns out, Reuters reports that there is one bit of good news for the banks. Financial institutions foreclosing on delinquent church buildings have so far been able to resell most of their inventory to other congregations.

Just as in the housing market, where foreclosures and falling prices created opportunities for new buyers to purchase starter homes, congregations that used to squeeze into a rented school gymnasiums or other temporary quarters are finding opportunities to buy starter churches on the cheap.

As William Cowper once observed: "God moves in a mysterious way, his wonders to perform."

Motley Fool contributor Rich Smith does not own shares of any companies named above. The Motley Fool owns shares of Starbucks. Motley Fool newsletter services have recommended buying shares of and writing covered calls on Starbucks.

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Living on a Prayer: Church Foreclosures Skyrocket

For all the house porn addicts, mind-blowing price tags, tens of thousands of square feet and double staircases are enough to satisfy their cravings for residential eye candy. At some point, however, those staples of grandeur might lose their luster. And if that sad day does arrive, they'll be left wondering what went wrong. 

But house oglers shouldn't despair: As it turns out, there's a whole other world of rich, eye-pleasing properties that can rekindle the magic: conversions. And we're not just referring to your regular old office-to-co-op conversions -- we're talking much bigger stuff -- missile silos, nuclear plants, churches, to name a few.

Click through our gallery to see some of the most offbeat, quirky conversions around. 

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Don't be fooled by the conventional exterior, this mountain retreat is actually a converted missile launching pad. The main lodge sits atop a 2,300-square-foot silo that's been transformed into a cavernous, luxury living space. 

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Formerly a Cold War launchpad, the home features a 125-foot stairwell that leads down to two master suites encased in concrete. 

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Amenities include a state-of-the-art kitchen, spacious dining room and Jacuzzis. The home's entertainment center is in a funnel-shaped pillar that used to serve as the missile pad's control center. 

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This conversion may not be a home, but we're making an exception because, come on -- how can you give the short shrift to an amusement park that's been constructed out of a nuclear plant? Giving a 1 million pound reactor quite the makeover, Wunderland theme park is in Kalkar, Germany, and features hotel rooms, bars, amusement park rides and restaurants. 

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One highlight of the reactor's Disney-like offerings is its wing ride. The ride whirls passengers around the inside of the retired power plant's cooling tower. 

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Touted as the world's most sophisticated nuclear plant, construction on the reactor began in 1972. But Chernobyl was a huge buzz, and prompted public outcry noisy enough to halt its construction. It sat dormant until a Dutch businessman snatched it up and transformed it into an entertainment complex that sees 600,000 visitors a year. 

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Location: Chicago, Ill. 
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Do you heap hymns onto the karaoke queue? Are you a sucker for Sunday double-headers?
Do you use the words "gosh" and "heck" a lot? 

If you answered yes to all those questions, then this could be your ticket to paradise. Formerly a Lutheran cathedral, this church is now a sprawling home. 

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From the outside, the home still looks like a church. But inside is a different story. Among other touches, the interior boasts double-oak staircases and ceilings that stretch 40 feet high. 

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The home's first floor has three bedrooms and a "bamboo-appointed" bathroom, HuffPost writes. The second floor, overlooking the space's sweeping hardwood floors, has the property's leftover pulpit. 

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The home has also held onto its two-story bell tower. Just be careful not to get trigger happy with the ding-donging. 

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Location: Savannah, Ga. 
Price: $3.35 million
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Built in 1892, this home was the "Ships of the Sea Museum" until it underwent a full-blown makeover that transformed it into a luxury home. The home offers stunning views through floor-to-ceiling glass windows. 

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The home has an elevator that lifts you up through three stories brimming with "custom finishes and fine craftsmanship," according to the listing. You can also use the home's winding glass staircase if you want a little exercise. 

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The home features an iron balcony, where you can see some jaw-dropping views.

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The home's third-floor terrace has a circular glass dome and two levels with a gas grill and potting shed.

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How about that! Apparently, a residence in Soest, Utrecht, Netherlands rests inside the sturdy shell of a what used to be a water tower. By the looks of a blueprint of the tower we found on, the structure has 7 floors. 

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A winding staircase leads visitors up the stark, cylindrical interior. 

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You don't to have travel to the water tower's top to slake your thirst: There's a tap in the kitchen. 

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Location: Tampa, Fla. 
Price: $1.35 million
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Stop, drop and roll! This home is a former firehouse built in 1911. Behind its staid, brick exterior awaits a glamorous interior with fine finishes and exquisite detail. 

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The home has an elevator, the listing says, but there's no mention of a fire pole. The second floor is basically just one sprawling penthouse. There's a "secluded" courtyard outside.

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The alternative dwelling is perfect for your well-heeled car buff: Its garage can, of course, house a few firetrucks -- or 12 cars.  

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Location: Carmel Valley, Calif. 
Price: $2.95 million
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With Armageddon just around the corner (according to the Mayans), house hunters may want to start thinking about how to ride out all that impending fire and brimstone. This converted 10-story satellite dish built to withstand a five-megaton nuclear hit is one option

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NASA constructed the Jamesburg Earth Station in 1968 to receive transmissions from the Apollo moon landings, the Los Angeles Times reports. The property offers 160 acres along with a 20,000-square-foot residential carapace with three bedrooms and a helipad. 

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Sheltered from the winds and equipped with its own self-contained air system, the Jamesburg Earth Station is "a great place for Armegeddon," owner Jeffrey Bullis told the L.A. Times


See also:
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Short Sales: The Long and Short of Them

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