Clearly, the U.S. banks have pulled out of the residential construction lending business. There exist
inconsistencies between different banks in how they work with builders. The majority of the banks are
opting out of a workout solution with the borrower under the notion that their hands are tied due to the
regulatory agency policies. If the issue is regulatory in nature, then how are a limited number of "good"
banks are consistently working things out with their builders across most all markets? Banks are selling
foreclosed properties at 30 to 40 cents on the dollar at a time where if they could capture 70 to 80 cents
if they just continued to work with the builder. The draw down effect on existing markets of these
"deals" just adds fuel to the foreclosure crisis. Builders have been asked not just to guarantee the
success of their projects, but it seems the well being of the economy in general.
Instead of a mutually beneficial workout situation with the builder (least loss alternative), most banks
appear to be forcing the builders into a "contrived default" situation. In many cases, the banks
encourage the builder to continue with the hope of potential loan renewal. The banks seek to be made
whole while the builder exhausts its cash. When the cash is depleted, the bank informs the builder they
will not continue funding. At that point, the builder may be forced into bankruptcy while the bank
bundles the assets and sells them for pennies on the dollar. Across the nation, sites exist with
incomplete infrastructure and the impact of lost fees and taxes to Cities.
Opportunities are being missed to pay our industry’s subcontractors and consultants, forcing most of
them into having substantial layoffs due to this withdrawal of liquidity. Worse yet, several will have to
close their doors, thus adding to the negative spiral effect on the economy.
Work on removing the caps on revenues for net operating loss carry back (NOL) through our lobbyists extensive network on Capitol Hill. Recapitalization for the majority of homebuilders would likely bolster stronger economic conditions nationwide, thus improving the chances for a stronger housing recovery. DONE! Legislation was Passed do to our Efforts!
Initiate legislation to force lenders to release foreclosed assets back on to the market. Banks are currently holding these assets tightly to avoid recognition of the loss (for fear it will trigger solvency issues). These recycled assets will be critical to the revival of our industry to provide the new land basis that our industry needs to commence profitable construction.
Continue to conduct seminars and help hotline conference calls to provide a forum where Coalition members can receive up to date legal and financial advice to help optimize their difficult situations and to help survive lender action.
Continue to raise funds from Coalition Members and our industry associations for our lobbying efforts in Member States and Capitol Hill.
Meet with Senators and Congressman in select districts with select builders from those jurisdictions. Goal will be to get as many House and Senate Members onboard for a "Dear Colleague" letter to be sent to the Treasury Secretary and Federal Office of Comptroller outlining our goals and concerns asking them to design standards and guidelines to advance our cause.
Continue to demand that banks receiving Troubled Asset Relief Program (TARP) funds be forced to use them for lending and not shoring up their books or acquiring other financial institutions. Lobby aggressively to make sure lenders receiving funds have guidelines imposed to ensure Federal subsidies are directed into the market place as well as mandate an extended timeframe for workout solutions.
Examine regulation in regards to long term workout solutions to achieve least loss results.
Help state industry associations push for reform in their respective states to adopt changes in personal guarantee law. Also, have state organizations help revise state contractor's license law to allow builder's to be able to retain or have their license reinstated in cases where current law would not allow due to lender action against the builder.
Help local industry associations push for reform in their respective counties and cities to adopt fee reduction and elimination, fee deferral, planning and permit process streamlining and expedited bond release. Also push for purchase of REO property by local housing agencies to place people faster in to decent public housing, lowering unsold inventories and helping to stem foreclosures.
Help guide the formation of a “Builder’s Bank”
