Lender That Really Does God’s Work Is Slowed by Funding Decline

By Miles Weiss

Nov. 18 (Bloomberg) -- Mark Holbrook helped fuel a church construction boom by originating more than $3 billion of mortgages in the past decade, transforming a $2 million credit union he joined after Bible college into the largest U.S. evangelical lender.

Evangelical Christian Credit Union, run by Holbrook since 1979, was the leading force behind the increase in credit flowing to churches in the form of five-year commercial mortgages with minimal monthly payments and lower initial costs than bond sales, the other widely used form of financing. Unlike the banks that joined the trend, ECCU catered exclusively to evangelical ministries, putting 83 percent of its assets in loans on churches and religious schools.

Now, the Brea, California-based company’s delinquency rate has more than doubled since the end of 2007 and mortgage originations have slumped because of a decline in financing. Commercial church mortgages are coming due with so-called balloon payments, replacement loans have disappeared and the highest unemployment rate in 26 years has cut congregant donations. About 145 churches have gone into bankruptcy since the credit crunch accelerated in 2008, an upheaval in a lending niche that bankers once ranked among the safest in real estate.

“We have seen more church foreclosures and bank-pressured sales, if you will, in this last year than we have seen in 20 years,” said Matthew Messier, a principal at CNL Specialty Real Estate Services Corp., a broker in Orlando, Florida, that caters to religious and educational clients. “A lot of people think commercial is going to get worse before it gets better, and it could be the same for many churches.”

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Another retail business down the drain.