Miami builders despair over early call-in of loans
By Yudislaidy Fernandez
Local and state homebuilders are demanding a timeout from banks calling in construction and land loans.
Some builders and developers are finding themselves at a crossroads, with banks changing terms of their loans based on reappraisals of the properties, said Ashley Bosch, new president of the Builders Association of South Florida. They are taking their timeout demands to Washington to try to persuade regulators to ease up on rules that force the stringent actions by banks.
Mr. Bosch said the calling in of loans is becoming a growing problem as banks, driven by regulators, are lowering loan values and asking builders to pay back the difference between the loan and the new appraised value. This is also occurring with loan holders who ask for extensions on loans.
Alex Sanchez, president and CEO of the Florida Bankers Association, said he could not give specifics on what would prompt banks to call in loans, saying "Every loan is different."
Banks are facing greater scrutiny from the Federal Deposit Insurance Corp., Federal Reserve System and state banking regulators, he said.
"They (regulators) are scrutinizing our loans because it is very important to keep the banking system safe and sound," he said.
Plus, he said, Florida is overbuilt and there is too much supply in the real estate market for the current demand, which he called another blow to loan values.
Mr. Bosch, managing director of Blok Urban Development, said his company, like others locally, is feeling the stress.
"We are not asking for a bailout but a timeout," he said. "We are asking that the Feds ease on the regulatory pressures because it is causing a spiral-down effect."
Mr. Bosch said the banks' actions are hurting the construction industry while allowing banks to regain liquidity and reduce their risk exposure.
If a lack of financing drives developers to halt or abandon projects, he said, the local construction industry, which employs more than 100,000, would suffer layoffs.
The delegation to Washington is pushing for regulators to soften their tactics because "they are only exacerbating the situation, not improving it," Mr. Bosch said.
Another delegation of builders, developers and contractors is planning a second visit to Washington next week to follow up on their demands, he said.
Both Mr. Bosch and Mr. Sanchez say they don't blame each other and value their close business partnership.
Mr. Sanchez said banks are planning to meet with builders and regulating agencies to resolve some of the issues.
Both agree most immediate is getting regulators to understand their strict rules are impeding the two from conducting business. Mr. Sanchez said some regulators and examiners are practically living at the banks and closely inspecting their loan portfolios.
Mr. Bosch said he hopes a solution doesn't come too late.
If banks continue to reduce the loans of builders and developers and ask them to pay back the shortfall, Mr. Bosch said, it could drive some to "turn in the keys" to avoid losing more money.