Home builders dogged by tougher lenders, foreclosures

Categories: Uncategorized | Posted: November 11, 2011

Midlands builder says regulators must ease up on banks to free money to stimulate the economy


Wade McGuinn says a Camden bank recently turned him down for a loan to build up to 30 homes in Kershaw County.

That is 90 jobs people don’t have, he said.

Those jobs are the reason homebuilding needs to grab more attention in the national debate on how to revive the battered economy, said Barry Rutenberg, chairman-elect of the National Association of Home Builders, who was in town this week to speak to Midlands-area builders.

“Every home that’s built is three jobs,” said Rutenberg, a builder and remodeler in Gainesville, Fla., adding jobs are critical to an economic recovery, as jobless rolls remain bloated nationwide.

But so far, even historically low interest rates that recently dipped below 4 percent for a 30-year fixed-rate mortgage have not been enough to motivate potential buyers. Home buying and home building rates are down at least 40 percent from the peak in 2007 in the Midlands.

Meanwhile, builders face competition from increasing numbers of home foreclosures and short sales, in which the bank accepts less money than is owed on a home.

“The ‘American Dream’ is not dead. It’s gotten dented,” Rutenberg said. “It will come back.”

New housing inventory nationwide is down as home builders have pulled back or been forced out of business because they can’t get loans, Rutenberg said.

McGuinn, a longtime Midlands builder, said it is time for regulators to ease up on banks so they can lend more money to help stimulate the economy. Otherwise, more builders are going to fail, he said, and eventually consumers will have fewer options.

At the height of the housing boom, credit was easy to come by for builders and buyers. But as the overheated real estate market crashed and plunged the country into the worst recession in a lifetime, banks that survived tightened lending standards and many builders were forced into bankruptcy.

Banks need to find a middle ground, Rutenberg said.

He has been pushing a bill in Congress – the Home Construction Lending Regulatory Improvement Act of 2011 – that his organization says would ease lending standards enough to get housing and the economy flowing again.

Mike Crapps, president and chief executive of First Community Bank in Lexington, said many community banks like his are lending to builders. But the hurdles banks have to jump to approve an application are higher than they were five years ago.

Crapps said his bank consistently has considered three criteria when lending to small businesses: the borrower’s ability to repay, backup collateral and the future of the line of business.

Home builders can be hurt when lenders consider the future success of their proposed projects if there is a big inventory of similar homes already in the area or they are building homes outside of the typical price range that sells in the area, he said.

“The regulatory environment is not going to lead all banks to make the same decision,” Crapps said. “Regulators aren’t saying to us, ‘Don’t make loans to a particular industry.’ ”

But reforms are needed, small business experts say.

At a Federal Reserve conference Wednesday designed to help small businesses, Fed chairman Ben Bernanke, a Dillon native, called on banks to ease overly tight lending standards.

The Fed has been holding training sessions to ensure that banks are meeting the needs of creditworthy business borrowers while maintaining appropriate lending standards, Bernanke said. Many small businesses have complained their banks have made it too hard to get loans.

“Small businesses have played an important role in fueling past economic recoveries,” Bernanke said. “We need to think carefully about how … our nation can best provide small businesses and entrepreneurs with the support they need to expand job opportunities.

The Associated Press contributed

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