The Board of Directors of the United Methodist Development Fund (UMDF) have, in effect, stuffed hundreds of thousands of dollars into the Christmas stockings of churches holding UMDF loans.

In an unusual move, the board approved not just a lowering of the interest rates for new loans but a decreased rate for outstanding loans. The Board has granted "forbearance"--a unilateral downward adjustment in the effective interest rate on all outstanding UMDF loans without changing the original terms of the loans. Outstanding loans with an interest rate higher than 8% will be reduced to 8% effective January 1, 1999.

So, a 9% loan closed three years ago will still have an original rate of 9%, but the effective rate charged after January 1, 1999 will be 8%. Under the decision, the rates on these loans could be readjusted upward to their originally contracted interest rates in the future. The board unilaterally reduced rates once before, to 10%, on all loans in excess of 10%.

The adjustment means significant savings for churches paying off loans.. For example, a 15-year loan of $600,000 at 9% interest would mean a monthly payment of $6,086. With the lower interest rate the borrower saves $352 per month or $4,225.00 per year on debt servicing. The savings are applied to principal, thereby allowing churches to pay off loans sooner.

"The goal of UMDF and the General Board of Global Ministries is to support mission. The UMDF board is unilaterally rolling back the costs of debt service on existing loans in the hope that the churches will use the hundreds of thousands of dollars saved on debt payment on mission and ministry throughout the church, " said Executive Secretary Dr. Darrell Reeck, who manages the fund for the church.

New borrowers also will benefit from a lower interest rate. The Board approved a one quarter point rate drop for basic loans and for loans for new church starts. The new loan rates are 8% for basic loans and 7.50% for new church start loans, effective January 1, 1999.