The Building Industry Is the Next Target of Foreclosures
January 26th, 2009
During the peak years the building industry took jumbo sized loans from banks. Now this industry is the next target of foreclosures. The industry itself is grinding to a halt thanks to the depression in the real estate market and the recession.
Much of the loan money had financed land deals that now appear to be dangerous miscalculations. Defaults and delinquencies are increasing by leaps and bounds causing developers, who had been once treated as VIP customers by the banks, as pariahs today. Even those who are current in their mortgage payments are not being spared harassment. John Fioramonti a real estate expert from Scottsdale, Arizona said, “They’re not distinguishing track records of one borrower against another. If you’re a builder, you are a bad risk.”
This about turn by the banks has led to a flood of complaints from the building lobby about harsh tactics and shoddy behavior from the banks. Mick Pattinson is a developer based from California. He bemoaned, “The behaviour of the banks is unprecedented.” He admitted that during the hey days of the housing boom, this group had been lording over but that does not mean today they deserve such brutal treatment.
Those taking up the cause of the banks say that the latter have no alternative to what they are doing while coming to terms with the economic downturn. For many months the federal regulators as well as their own shareholders have been putting pressure on them to put a check on lending money to a sector that is stumbling. It is argued that the lenders are not behaving unfairly or irrationally because they are bound to protect themselves.
It is vital that builders and developers have easy access to credit. They rely and depend on it for acquiring land and building houses.
Over 15% of the loans taken for construction of single-family houses are in default in September 2008. This is an increase by 10% from January 2008 as per the findings of Foresight Analytics. Till recently banks have kept afloat the defaulters hoping that a recovery would clear the way for a change in the general health of the economy enabling the borrowers to start clearing dues.
A housing analysis firm, Zelman & Associates opine that the losses emanating from the construction sector will ultimately reach $165 million. This is one of the reasons why federal regulators are putting the pressure on banks.
- Civil Courts are Clogged by Staggering Number of Foreclosures
- Scam Companies Are Proliferating, Thanks to Foreclosure Crisis
- The Obama Government Aggressively Responding to the Foreclosure Crisis
- Foreclosure Measures Being Discussed by Congress and HUD Secretary
- Ben Bernanke Facing Brickbats As Well As Kudos for His Foreclosure Mitigation Plans
- House Builders and Mortgage Associations Wake Up To the Benefits of Empowering Judges to Modify Loans to Avoid Foreclosures
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