Mega church faces foreclosure over $14M in mortgage, other costs

Mega church faces foreclosure over $14M in mortgage, other costs
By JUDY L. THOMAS and MICHAEL MANSUR - Kansas City Star - 1/31/2011
A bank has threatened to take possession of First Family Church in Overland Park if it doesn’t pay more than $14 million in mortgage and other costs.

A foreclosure petition filed in Johnson County District Court last week by Regions Bank asks that the property be foreclosed and if payment is not made that it be sold, with the proceeds applied to the debt.

The mega church, which was described at one time as one of the fastest-growing in the country, came under scrutiny in 2007 after The Kansas City Star reported that hundreds of members had left the church over concerns about financial accountability.

The Rev. Jerry Johnston, founder and senior pastor, did not respond to a request for comment on Monday.

But the church’s board of elders issued a statement on the First Family website Monday afternoon after The Star asked for a response to the foreclosure petition.

“Your church leadership, pastors, elders, deacons, and ministry leaders have been praying and in a spirit of unity,” the statement said. “We are confident to resolve this situation while all ministries and worship services continue as scheduled on our campus.”

Last year, the statement said, Regions Bank “unexpectedly” called the church’s mortgage, demanding full payment within 30 days — “terms which were financially impossible for the church to comply with.”

The statement said that “this is happening to churches across the country according to the Wall Street Journal, 1/24/11 — another reality of our country’s economic crisis.”

The Wall Street Journal article said that since 2008, banks have foreclosed on nearly 200 religious facilities, up from eight in the previous two years. The newspaper attributed many of the foreclosures to churches that ran into trouble by borrowing money to build larger houses of worship.

The First Family Church statement also said that Regions Bank had recently accelerated the mortgage maturity from 30 years to five years, “forcing this situation even while First Family Church was current in its obligations.”

“We recognize banks today are under immense pressure by federal regulators. These are uncertain economic times.”

A spokeswoman for Alabama-based Regions Bank said she could not comment on the foreclosure proceeding.

“The petition speaks for itself,” Evelyn Mitchell said.

It’s unclear how quickly the church could lose possession of its building if the debt is not settled, foreclosure experts said. At minimum, church officials would have up to 30 days to respond to the bank’s petition, said Berry Laws, whose Kansas City firm represents creditors in foreclosure proceedings.

The entire foreclosure process can typically take four to six months in Kansas, Laws said.

In September, the bank sent the church a letter demanding payment; the obligations matured on Aug. 16 and the church has not paid off the debt, the letter said.

“This letter provides notice to you that you failed to pay the obligations within ten days of that maturity date, and the entire amount of the obligations is now due and payable,” said the letter, which was included in the legal filing.

According to the foreclosure petition, the church owes $13.7 million on two loans plus $630,384 in interest. The interest continues to accrue at the rate of $2,740 a day, the petition said.

The church, a highly visible structure that sits on 61 acres at U.S. 69 and 143rd Street, was valued by the Johnson County Appraiser’s Office at $21.3 million in 2009. But in 2010, the value dropped nearly 11 percent, to $18.9 million.

The Star’s 2007 report brought attention to concerns of members that the church was structured in a way that provided little financial oversight.

Shortly after that, the Kansas attorney general launched an investigation into the finances of Johnston and his church after receiving complaints alleging that Johnston had misused church money.

First Family Church board chairman Robert Ulrich responded at the time in an e-mail to church members: “Due to our pastor’s ongoing prominence locally, nationally, and internationally as a spokesman for Christ and biblical values, he and the church may continue to be assailed.”

On Monday, a spokesman for the attorney general said the state investigation had been closed.

“They went to the church, interviewed employees and parishioners and did an exhaustive investigation,” said Jeff Wagaman. “There were not charges filed because they could not find any activity that violated the Kansas Consumer Protection Act.”

However, Wagaman added, “Our division did refer some of the individuals to the IRS in case they wanted to pursue an investigation.”

After the article, complaints also were filed with the Internal Revenue Service questioning possible misuse of church money. In 2008, the IRS attached tax liens to the church property, citing more than $107,000 in unpaid payroll taxes from 2007. The church quickly paid and the lien was released.

The church has experienced other financial problems in recent years as well. According to the Johnson County Appraiser’s Office, the church has a delinquent tax bill of $9,867.80 for 2010.

In 2007, several contractors filed mechanic’s liens against the church, saying they were owed money for work they did on a new children’s building. The liens were later released.

To reach Judy L. Thomas, send e-mail to