Builders Take Exception to Banking Regulator Assessment

Recent comments by a banking regulator about commercial real estate lending are making it tough for builders to get construction financing, according to the National Association of Home Builders. "We have received scores of reports from builders across the nation who have been unable to obtain acquisition, development and construction financing for viable projects or have experienced adverse treatment regarding an outstanding loan," said NAHB president Bob Jones. Due to pressure from regulators, banks are not issuing new AD&D loans and they are calling in existing construction loans to "get them off their books," Jones said. Comptroller of the Currency John Dugan recently called on the regulators to impose hard limits on CRE and construction loans. He stressed, however, that limits should be carefully phased in so problems at distressed banks are not exacerbated. But NAHB contends the comptroller is sending the wrong signal. "With the housing market struggling to regain its footing, regulators need to be issuing more flexible guidelines that will encourage banks to maintain funding for residential AD&C loans in good standing that fall below their underlying value," said Jones.