Federal Bank Takeover Hurting Some Home Builders

Washington, DC, Nov. 21, 2008--U.S. Home builders seem to be blaming U.S. federal regulators for at least some of their financial problems.

Home builders with outstanding construction loans are having to stop work on new housing developments and are losing sales because of failed banks and thrifts that have been taken over by the Federal Deposit Insurance Corp., the National Association of Home Builders, or NAHB, said in a statement Thursday afternoon.

"Builders with outstanding loans that are placed under FDIC control are frequently unable to contact a decision maker to deal with routine but time-sensitive matters related to loan draws or extensions," NAHB President and CEO Jerry Howard said in a letter Thursday to FDIC Chairman Sheila Bair.

NAHB highlighted Texas in particular as an area of the country where builders are reporting severe financing problems stemming from FDIC bank takeovers.

In his letter, Howard praised the FDIC for working to stop foreclosures but added that housing-production loans are now experiencing the same kind of severe stress affecting the home mortgage sector.

"Home builders are having extreme difficulty in obtaining credit for viable projects, and those with outstanding construction and development loans are experiencing intense pressure as the result of requirements for significant additional equity, denials on loan extensions and demands for immediate payment," he said.

"In many cases, performing loans are rendered nonperforming as a result of these actions."

Meanwhile, a report earlier this week showed that home builders' confidence in the market has plunged to a record low amid overwhelming uncertainty about the economy.