BLOG VIEW: One of the more distressing developments of the ongoing real estate crisis is the rising number of churches being foreclosed upon and shut down by lenders. According to data compiled by CoStar Group, a record 138 foreclosed churches were sold by banks last year – four years ago, only 24 churches met that fate.
Recently, one historically significant church was on the cusp of being foreclosed upon: the 194-year-old Charles Street African Methodist Episcopal (AME) Church in Boston, which was forced to declare bankruptcy to stave off foreclosure. The problems facing this church are different at a number of levels, not the least being the dubious lender at the center of the controversy.
The financial institution in question is Boston-headquartered OneUnited Bank, which is also involved in the ongoing congressional ethics violation probe involving Rep. Maxine Waters, D-Calif. In the aftermath of the 2008 crash, OneUnited Bank received $12 million from the Troubled Asset Relief Program (TARP) due, in large part, to Waters' aggressive lobbying. Waters told a sympathetic Treasury Department that OneUnited's capital was ‘all but wiped out’ due to its heavy investing in Fannie Mae and Freddie Mac – though she somehow forgot to mention that her husband was a former director of OneUnited Bank and held $350,000 in its stock, which was preserved thanks to TARP.
One might imagine that a bank that received a second lease on life would be cognizant of the financial problems that other entities are enduring. Alas, the TARP dollars did not provide OneUnited with anything resembling a teachable moment.
In this case, Charles Street AME Church recently found itself facing extinction at the hands of OneUnited, which threatened to foreclose on the church and auction off the property. The problem involved a $1.1 million balloon mortgage that the church has failed to repay, as well as $3 million that it says the church owes on a construction loan for an unfinished community center. OneUnited cut off the funding of the construction loan in 2009, and the church has argued that it has been unable to complete its community center or meet the bank's demands for immediate repayment.
Foreclosure would seem like an ignoble end for the church, which has played a major role in both Boston's history and the wider cause for human liberty. Founded in 1818 by free people of color, the church was in the forefront of the abolitionist movement and hosted anti-slavery rallies by the likes of William Lloyd Garrison and Sojourner Truth. It was also a safe haven for escaped slaves traveling the dangerous Underground Railroad route to freedom. In the course of the 20th century, it offered spiritual leadership in the fight by Boston's African Americans seeking social equality and economic prosperity.
There is an additional racial element to this story: OneUnited is the nation's largest black-owned bank. But that actually has little to do with the case – the only color OneUnited seems to care about is green.
Rev. Gregory G. Groover, the church's pastor, has stated that he wants to repay the loan, but says that OneUnited has been unwilling to work with him. ‘This is our loan, and we own it,’ Rev. Groover said in an interview with the Boston Globe. ‘We want to pay it back, and we think there is a reasonable way to do that. This will be wonderful news for the city, that these institutions can work it out.’
Rev. Groover's willingness to repay debts stands in stark contrast to OneUnited's modus operandi – to date, it has not repaid the TARP money that kept it alive and kept Waters' husband in the chips.
But, then again, this is a bank with a very peculiar concept of money. According to a 2010 Washington Post profile of the lender, OneUnited used its funds to finance an $880,000 Miami Beach condominium and lease a $26,500-a-month mansion for its chairman and CEO, Kevin L. Cohee. And to accommodate its leader's transportation requirements, the bank also bought Cohee a Porsche. To steal a line from the classic Gershwin tune, nice work if you can get it!
At a recent U.S. Bankruptcy Court hearing, an attorney for OneUnited accused the church of ‘gross, severe financial mismanagement,’ but then added the bank's ‘goal is absolutely not to put Charles Street AME out of business.’ That last statement is a bit strange, considering that the bank and the church were in bankruptcy court because OneUnited tried to foreclose on Charles Street AME Church.
The pressure is now on OneUnited to find an equitable solution, with major local figures – including Boston Mayor Thomas M. Menino and U.S. Sen. Scott Brown – openly applying pressure on the lender. This type of influence will avert the tragedy that Charles Street AME Church was facing, and perhaps it will offer an inspiration to lenders elsewhere in the country that are eager to rush financially distressed houses of worship into foreclosure.
As for Waters, she has made no public comment about OneUnited Bank's attempt to foreclose on Charles Street AME Church, which is probably for the best.
– Phil Hall, editor, MortgageOrb
(Please address all comments regarding this opinion column to hallp@mortgageorb.com.)
