Banks Squeezing Builders on ADC Loans?

Banks are squeezing builders by imposing tougher terms on acquisition, development, and construction loans, and it is going to lead to more defaults, according to the National Association of Home Builders. Lenders are seeking additional equity on outstanding ADC loans and "balking" at loan extensions, the president of the Illinois Home Builders Association, Scott Eckstein, told the House Small Business Committee. "Defaults on ADC loans are rising" and "banks are actively reducing exposure levels to home credit," Mr. Eckstein testified. The NAHB is urging federal banking regulators to take a "balanced" approach in evaluating construction loans. "Overly pessimistic assumptions about future home sales and values will result in an unnecessary extension of the credit crunch and housing recession," the Illinois builder said.