Builder, Developer Loans Face Pressure, FDIC Says

Washington, DC, March 5, 2008--The number of loans to homebuilders and other developers that are past due has reached the highest level since the early 1990s.

Banks of all sizes are facing a growing number of loan defaults from builders unable to sell houses, and from developers whose projects turned out to be less popular than they anticipated.

Nearly 3.2 percent of those loans are 90 or more days past due rose, Sheila Bair, chair of the FDIC told Congress on Tuesday. That's up from a 1 percent rate a year ago.

What were once regarded as safe loans are turning out to be anything but safe. For instance, Dallas-based Comerica Inc., until recently formerly headquartered in Detroit, allotted $108 million for loan losses in the fourth quarter primarily because of bad development loans the bank made, particularly in California and Michigan.

Construction and development loans are loans for projects such as strip malls, office buildings and residential developments. They are one of the main profit centers for banks of all sizes, especially smaller banks.