Late and non-performing construction loans as well as construction REO jumped again. But before I get into that we have two announcements.
First, we are now reporting distressed construction loans and construction reo different than we have in any prior quarter. We’re doing this for two reasons. The first is that our goal is to bring you the most accurate bank data possible. We’re now separating 1-4 Family late and non-performing residential construction loans from all other construction related loans. We think that this is going to give a more accurate portrayal of what’s happening in both sectors.
The second reason is that BankProspector 2.0 will be reporting the distressed construction data in this same way and we though we’d start speaking the same language right off the bat. Which brings me to my second announcement.
We’re late. We’ve been working hard around the clock (literally) to get BankProspector 2.0 to launch but we’re no there yet. We’re behind schedule and we’re here to admit it. The challenge is that we’re working to bring you something that will really knock your socks off and the fact is that we’re playing with huge amounts of bank and other data. So a big thank you to existing members bearing with us and please rest assured that we’re going to make it up to you with bonuses and the like as soon as we release. We expect a BETA release, dare I say, very shortly. Now back to business.
Non-Performing Construction Loans and REO
Excluding residential, construction loan and REO trouble bumped up a little more than 6% in Q1 from Q4’09. With banks handling just over $74.1B in late loans and REO.
With distressed residential construction factored in, the total actually drops about .9% (a little less than $1MM) to $95.7B from $96.6B. The biggest difference coming in the non-accrual column which, it would seem, makes it safe to say that banks are pulling the trigger on lingering non-performing loans. Though, with all the bank closures forced by bad construction loans I wonder if some of this wasn’t just moved right off of the reporting table and into receivership. Surely some of this is due to write-downs and we’ll be able to quantify that in BankProspector 2.0. If someone can answer the question about receivership we’d love to hear from you in the comments.
Construction REO accounts for about 18% of the totals discussed above at $17.6B. What I’m hearing on the street and so are many of my colleagues is that a lot of lenders are trying to finish up their projects and pursue retail pricing. This is going to be a very hard road and likely fruitless for most of them. Of course every project and location is different but generally speaking there is an abundance of inventory and banks I’ve found don’t make great contractors.
As you can see in the chart at the top of this page the non-accrual construction (in red) continues to grow which means there’s still a lot more opportunity in the pipeline for investors and still a lot of pain ahead for lenders.
Learn More about how BankProspector 2.0 helps you find banks with with distressed assets, non-performing loans, and REO. Click Here.
About Brecht Palombo