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Old 11-02-2012, 08:57 PM   #41
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There's a church not too far from here that is so big, I call it the "Baptidome". But from all appearances, they have a very large, well-to-do congregation. Not sure if they issued bonds...
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Old 11-02-2012, 09:03 PM   #42
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The congregations my or may not be flaky. I have no real way of knowing. In any case, nobody is contractually obligated to remain a member of the church and keep forking over contributions, so I have to be able to look to the collateral if things do go pear-shaped. We do not get to see the appraisal write-up, so we can only guess as to the methodology used. However, given that the churches are limited by bond indentures to a maximum 75% LTV for the issuance of additional bonds, I bet there is some pressure to have a nice, high value assigned to the property. The problem is that if you have to repo, the church will not be worth a fraction of stated value because the next buyer most likely will not be a church.
Good points. Thanks.
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Old 11-02-2012, 09:06 PM   #43
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Good points. Thanks.
To be fair, one of my occupational hazards is having to regularly look at commercial real estate loans that have gone bad, so my antennae have definitely een sensitized. I may be over reacting.
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Old 11-02-2012, 09:49 PM   #44
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To be fair, one of my occupational hazards is having to regularly look at commercial real estate loans that have gone bad, so my antennae have definitely een sensitized. I may be over reacting.
I'd rather hear all the reasons that something can go bad than a bunch of cheerful reasons that it's so good.

I still remember "Why, for us to lose money on these bonds, the whole darn county would have to go bankrupt, ha ha!"

I can only imagine what it's like for congregations who have to seek mortgage financing through their chain of command instead of the public markets. I bet there's not much faith-based investing going on there...
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Old 11-02-2012, 09:54 PM   #45
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Actually, banks do loans to churches on a fairly regular basis. One of the questions that I don't have a good answer to is why the churches are going to the bond market (sort of) instead of the banks. I think I know the answer, and it does not give me any comfort at all.
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Old 11-02-2012, 11:51 PM   #46
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I think I know the answer, and it does not give me any comfort at all.
Exactly. Back to the question of whether we're being adequately compensated for the extra risk, and making sure that we can diversify to avoid concentrating the defaults.

I think there's also a component of socially-responsible investing (or "impact investing") at work that plays on emotions.
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Old 11-03-2012, 08:22 AM   #47
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To much risk for only 7% in an individual bond.

If I were going to buy an individual bond, it would be something more like Thompson Creek Metals...building a huge gold and copper mine and the bond is paying 14%. (Render unto Caesar the things which are Caesars and all that ).
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Old 11-03-2012, 10:02 AM   #48
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Exactly. Back to the question of whether we're being adequately compensated for the extra risk, and making sure that we can diversify to avoid concentrating the defaults.

I think there's also a component of socially-responsible investing (or "impact investing") at work that plays on emotions.
I think you are right. In my first post on the thread eluded to that I view it as a potential charity event. And there is some giving money to further a cause I am interested in. I also think that while people in the church might want a rate of return they don't want the church to pay a high rate and they have skin in the game based on other reasons. This is why knowing the % of bonds that were sold to the congregation is so important to me. Probably more than LTV because if it goes south they will ride it into the ground.

So many times no matter what side the line we are on we try to bolster our argument and down play the things we don't want to see. We see this a lot with newer investors that invest on emotions not on facts. I still do this in some areas (maybe this one) however I think I understand the risks or at least am willing to except them.

Even with the P2P I do think I could structure a portfolio with enough diversification to get what I want in return. I just can't get past the time commitment initially to pick what I want. I would rather be doing other things for now.

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Old 11-03-2012, 10:26 AM   #49
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Actually, banks do loans to churches on a fairly regular basis. One of the questions that I don't have a good answer to is why the churches are going to the bond market (sort of) instead of the banks. I think I know the answer, and it does not give me any comfort at all.
Our church had financed a new sanctuary building with a traditional bank loan. The terms were not very good, so when we were getting ready to build a new education building, we rolled the old bank mortgage into the bond issue for the new building and reduced the interest rate dramatically over what we would have paid the bank to do the same thing. Plus, we essentially were paying ourselves the interest instead of the bank as 100% of the bonds were purchased by people associated with the church.

I would agree that the proportion of the bonds purchased by the congregation would be a good indicator of the risk level.
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Old 11-04-2012, 08:51 AM   #50
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[QUOTE=brewer12345;1245370]Actually, banks do loans to churches on a fairly regular basis. One of the questions that I don't have a good answer to is why the churches are going to the bond market (sort of) instead of the banks. I think I know the answer, and it does not give me any comfort at all.[/QUOTE]

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Exactly. Back to the question of whether we're being adequately compensated for the extra risk, and making sure that we can diversify to avoid concentrating the defaults.

I think there's also a component of socially-responsible investing (or "impact investing") at work that plays on emotions.
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Our church had financed a new sanctuary building with a traditional bank loan. The terms were not very good, so when we were getting ready to build a new education building, we rolled the old bank mortgage into the bond issue for the new building and reduced the interest rate dramatically over what we would have paid the bank to do the same thing. Plus, we essentially were paying ourselves the interest instead of the bank as 100% of the bonds were purchased by people associated with the church.

I would agree that the proportion of the bonds purchased by the congregation would be a good indicator of the risk level.
I think that's Brewer's and Nords' point; inadequate compensation for the additional risk. Perhaps a better indication of risk than congregation holdings is the % rate the bank was charging.
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Old 11-04-2012, 09:01 AM   #51
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It is quite possible that as long as this stays a small, sleepy market where people keep playing by the same rules, it will be a safe source of return. However, the things that make it safe are behavioral rather than contractual and they can change, possibly without warning. The big mistake I made in not catching the crazy turn into the sewer of the mortgage markt is that I underestimated how foolish people would become with their homes and how draconian they would be once things were not stacked in their favor. Church bonds might be and remain a good place to park money, but the lack of contractual protections make me uncomfortable.
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Old 11-04-2012, 04:18 PM   #52
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I read the church in Flint info,I see someone was driving a 50k car. That would make me nervous.
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Old 11-06-2012, 12:54 AM   #53
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Nords - INTERESTING topic. Before I retired 12/2009, I worked in the Treasury Dept for our local Municipal Electric District in Sacramento, CA. And "prospectus" work ... or "Official Statements" as they were called for us ... was one of our regular products. Is was INTERESTING to take a quick gander at the one for Brazos Fellowship. VERY similar in design and structure. I felt REAL comfortable glancing thru the doc. Not sure I would INVEST... but then again... it IS a faith thing.

Thanx for the notion.

Alan W. (retired CPA - which REALLY stands for Constant Pain in the ... well you KNOW the rest!)
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Old 12-03-2012, 07:27 PM   #54
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Another bond called today. It had a maturity of 2031 as this one was compounding. oh well 8.1% for 5 yrs

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Old 12-28-2012, 07:30 PM   #55
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Another early call on a 2024 bond.

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Old 12-28-2012, 08:00 PM   #56
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Another early call on a 2024 bond.

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Not surprising at all. I would expect to see everything that can be called get called. The chase for yield is in high gear and issuers are taking advantage of it by refinancing.
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Old 12-29-2012, 02:17 PM   #57
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Not surprising at all. I would expect to see everything that can be called get called. The chase for yield is in high gear and issuers are taking advantage of it by refinancing.
Agreed!
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