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NAHB Shares Construction Lending Concerns With FDIC Chairman
 NAHB Senior Officers emerged from a Dec. 17 meeting in Washington with Federal Deposit Insurance Corporation Chairman Sheila Bair and her staff with the encouragement that the FDIC is interested in working with home builders to resolve key issues related to the ongoing credit crunch for acquisition, development and construction (AD&C) financing.
NAHB has been receiving increasing reports from its members in the field that they are encountering extreme difficulty in obtaining credit for viable projects. Builders with outstanding construction and development loans say they are experiencing intense pressure as the result of requirements for significant amounts of additional equity, denials on loan extensions and demands for immediate repayment.
In too many cases, performing loans are being rendered nonperforming as a result of these actions, adding to foreclosures and increasing the inventory of unsold or only half-completed homes.
In their meeting with Chairman Bair, the Senior Officers said that the problem has now spread beyond the housing boom and bust states to almost all parts of the country. Banks have become growingly reluctant to continue making loans on viable housing development, despite banking regulators advising them of the importance of doing so. At the same time, they are not providing reasonable flexibility on working on modifying the terms of troubled outstanding loans to avoid foreclosures or loan calls.
At the meeting, Bair indicated that the FDIC would reiterate its existing supervisory guidance that encourages lenders to work with borrowers to avoid foreclosure.
The FDIC also said that it is in the process of including in its supervision of lenders a system that will monitor how institutions are using the TARP (Troubled Asset Relief Program) money and other federal liquidity assistance that they are receiving. Builders are increasingly concerned that lenders are not using this capital enhancement to make new loans or support workouts on existing loans.
Perhaps most significantly, Bair expressed a strong interest in working with NAHB to improve the FDIC’s receivership process and develop information for builders affected by the agency’s takeovers of failed banks. NAHB members have been reporting major difficulties with funding cutoffs and in communicating and dealing with personnel at institutions that have been taken over by the FDIC.
The Senior Officers commended the chairman for her efforts to reduce mortgage foreclosures and expressed support for the FDIC's proposed new foreclosure mitigation program. For a related story in this issue of NBN, click here.
For more information, e-mail David Ledford at NAHB, or call him at 800-368-5242 x8265.
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