Banks, builders differ on need for more lending

Posted January 9, 2009
Updated March 9, 2009

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— The economic downturn has stalled a housing market that used to rev at high speeds, but builders and bankers don't agree on the solution for getting the economy back into gear.

Builders and developers say things could get moving again if banks would start lending, allowing consumers to begin taking advantage of low interest rates to buy homes and cars.

Banks have become more cautious about lending after the housing bubble burst last year, sending the nation into an economic tailspin. Previously, money was easy to get for almost everybody, regardless of creditworthiness.

New home, home construction generic Where's all the bailout money?

"We sort of went in the direction of looking at housing as an investment, almost like playing the stock market," said Tim Minton, executive director of the Home Builders Association of Raleigh-Wake County. "There would be a financial institution out there somewhere that would let you borrow the money, and those days are now gone."

When Congress approved a $700 billion bailout of the ailing financial system last fall, the government begged the banks to use the money for consumer loans to jump-start the sluggish economy.

Builders maintain that isn't happening, noting their businesses are suffering because few people can get a loan to buy a new home. On Thursday, they called for a bailout of their own industry, including tax breaks for buying a home and incentives to keep mortgage rates low.

"(Banks) have got to see that the risk is abating with the buyers beginning to buy homes," said Richard Gaylord, president of Richard Gaylord Homes in Raleigh and president of the North Carolina Home Builders Association.

Bankers say they are lending money to people and businesses that can repay the loans.

BB&T received $3.1 billion from the federal bailout, and Senior Vice President Bob Denham said more than half of that has been lent out already.

"There is still credit available to creditworthy borrowers," said Ed Aycock, senior vice president of the North Carolina Bankers Association, adding that credit is more restrictive than it was a year ago.

Mike Moore, chief financial officer of Raleigh-based Capital Bank, agreed that banks aren't hoarding bailout money.

"I think that there are some people who have financial difficulties who are going to have trouble being financed, but that's a very natural progression," Moore said.

Capital Bank received $41 million from the government, and Moore said it plans to hire 15 mortgage officers and set aside more than $20 million for people to buy high-end homes.

"We are lending that money to our existing customers, as well as reaching out to new customers," he said. "If you're a business person and you've managed your affairs and your business is working, you should be able to obtain financing for your business as well."


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  • districtcadvocate Jan 9, 2009

    I question is who has a job that will last for the duration of a home loan (15 or 30 years) in today's market.

    Buying a home was a long term committment and consumers were getting jobs that lasted a life time. Today there is no long term committment to be found anywhere so therefore there is no confidence.

    I don't blame bankers being scared of long term lending when our country is on a short term kick.

  • DontLikeTheSocialistObama Jan 9, 2009

    Lending to people with poor credit is what caused the financial mess in the first place.

  • BIGDAWGShouse Jan 9, 2009

    Yeah but when asked where is the money and what are you doing with the money WE gave you and the banks say, "WE AREN'T TELLING YOU!!" What?!! you just took MY tax dollars and you won't tell us what you are doing with it....our country is a laughable joke...around the bowl and down the hole is where we are heading...I got another brilliant idea..LETS PRINT MORE WORTHLESS MONEY.....the money bubble is about to burst and America will be on her knees begging for mercy

  • whatelseisnew Jan 9, 2009

    It would be pure idiocy to lend money to anyone that did not have a top notch credit rating. Of course, the builders want the banks to hand out the money, the builders are not on the hook to get paid back, the holders of the mortgage paper are on the hook. I am glad to hear that some sanity has come back into the lending practices.

  • fatcat11 Jan 9, 2009

    Lending is what got us into this mess.An old saying,when you're in a hole,stop digging....