Some Construction Loans Are Following Subprime Mortgages In Being Delinquent
SOURCE: The New York Times
Federal Deposit Insurance Corporation released figures last week showing both midsize and small banks had construction loans outstanding that were greater than their total capital.
Banks, especially small banks, have leaned on construction lending as the economy is slowing. This strategy was good practice. Construction loans were profitable for smaller banks. Competition from larger banks and securities closed areas such as mortgage lending and the issuing of credit cards.
Currently approximately 3 percent of all construction loans are classified as being nonperforming, or have borrowers that are behind on their payments. That is the highest proportion in a decade.
Construction loans are particularly bad when a construction project starts but cannot be finished.
Read full report »
Federal Deposit Insurance Corporation released figures last week showing both midsize and small banks had construction loans outstanding that were greater than their total capital.
Banks, especially small banks, have leaned on construction lending as the economy is slowing. This strategy was good practice. Construction loans were profitable for smaller banks. Competition from larger banks and securities closed areas such as mortgage lending and the issuing of credit cards.
Currently approximately 3 percent of all construction loans are classified as being nonperforming, or have borrowers that are behind on their payments. That is the highest proportion in a decade.
Construction loans are particularly bad when a construction project starts but cannot be finished.
Read full report »
