Feb. 26, 2009 - How Banks Are Destroying the American Builder (and the American Dream)
If you rob a bank, you will be prosecuted. Heavily prosecuted. However, the government is fully allowing banks to rob the American Homebuilders, that are barely hanging on by a thread as it is, in these tough economic times. Let me share with you some of my personal knowledge and experiences of what they have done to my family.
Let me give you some background info:
I have been married to a homebuilder for 17 years. Although we are now separated, and pending a divorce, it truly pains me to see what they are doing to the business that we BOTH put our hearts and souls into for over 10 years. Our company is very representative of the average American small homebuilder. We built approximately 50 homes in 2007 and cut that down to about 20 last year. We are no longer building, but just trying to sell off remaining inventory. After that, I don't know what the company will do, other than the occasional pre-sold custom build.
We pride ourselves in our reputation. Not only with our customers, but within the industry. And our family names are on the business. We planned on handing it down to our children, if they so choose. Chris was a third generation homebuilder. Now, barring a true miracle, it probably won't go to a 4th generation. We are the faces and the hearts behind the names. We don't want you to look at us as a statistic or just "another number." Everyone in this business has a "story" and these days it often involves a lot of pain.
We moved here for better opportunities from West Virginia back in 1999. Soon thereafter, Chris learned the "tools of the trade" from his Uncle, who has been in the building business for around 20 years. It came natural to him, as his grandfather, and great uncles, had all been builders and tradesmen as well. I got my real estate license shortly after he started building, and together we partnered into building our company into a business that in 2007 was listed as one of the top 25 builders in Metro Charlotte (even against the BIG guys).
While over the last ten years, we have enjoyed many rewards and opportunities of this business, we have never been "filthy rich." We have lived comfortably and purchased our family farm, after a 3 year search, for an affordable amount. We paid our employees well, and considered them not only our business partners, but our extended family. Our last remaining employee will leave "our family" tomorrow.
Unless you have ever owned a small business, you can not possibly know how much it hurts to let good, hard working employees go, thru no fault of their own. Worrying about how they will feed their families and pay their bills. But we have our own children to feed, and our own bills to pay too. But we have ALWAYS paid...
This is where the banks come in. While we have made many tough decisions, dismissed employees, consolidated offices, and made huge cut backs, we have always paid our bills. This includes thousands upon thousands of dollars of commercial loans and their interest "carry." Most of these notes were issued a year or more ago. At one year, these notes are either "called" or "renewed" by the commercial lenders.
We have never, to my knowledge, missed a payment. Something that we're proud of, but now feel like we are also being penalized for. Banks will NOT negotiate with a debtor that is not behind. In fact, upon renewal they are RAISING the Interest rates on these commercial loans in SPITE of the prime interest rate being SIGNIFICANTLY lower, than when the original note was issued! This is also in spite of our good payment history. Our personal experience has been a 2-3% rate hike over a commonly issued 6% original commercial loan from last year.
The banks say that this is "risk management." I think it is HIGHWAY ROBBERY, and that at the very least I want the American public to know what they have done. They are "socking it to" the ones of us who are left, to make up for the ones already gone. They are running us out of business with these rates and practices. Many, many of our builder and trade friends are truly suffering. Losing their new and personal homes, filing bankruptcy, and yes even ... going hungry. These are not just statistics people, they are families.
Today, I got a call from a closing attorney regarding a transaction scheduled to close tomorrow (thank God!). But the banks and the title insurance nearly derailed this sale, which would have been devastating not only to us, but to the homebuyer, I am sure. It seems that banks have requested that no title insurance be given unless, not only the builder signs there are no lien waivers, but that each and EVERY VENDOR who EVER worked on that home, signs lien waivers too.
This news comes a DAY before closing! And many of the original framers, roofers, and various vendors are now out of the business. We have no idea how to even track them down. We have a few new ones on our list to complete warranty work, and that is about it.
I never thought I would say this, but I am glad the home has sat finished for nearly a year. It was our saving grace. I remembered that in the state of North Carolina, that all mechanic's liens HAVE to be filed within 120 days of completion (certificate of occupancy). I told Chris to call back the Attorney's office and tell the Title Insurance Company AND Bank of America, to "wipe their hineys" with the CO, and that they better not stand in the way of this closing. Yes indeed, I was mad, but I am gonna get my paycheck tomorrow. And Chris will pay off this loan, at least, to another greedy lender who recently raised our rates extraordinarily.
And hopefully, we still have enough left in our dwindling savings to keep paying for our own home, and for our children's meals. But we are now at a definite crossroads, where we too are contemplating, pursuing other means of providing. Even though we both take great pride in our individual companies, and what we have accomplished, that won't keep paying the bills.
And consumers (and buyer agents too), something else you should know, just because you see that the Seller/Builder is walking away with a few thousand dollars from the closing, please do NOT think they have made that all as profit. I have recently had to stop going to closings because I had an obnoxious buyer who went off that we "made money." He didn't realize that my family personally took a $40K loss on that house, and just the lender got paid. I was so mad but restrained myself to the point of just shaking my head, walking out, bursting into tears, and punching the wall (instead of him) on the way out of the building.
Don't worry I still review all HUD statements prior to closings for Sellers, and attend with my buyers. But I admit I get too emotional, knowing how much money I, or Chris, or one of my other builder friends, is losing at that table...
I do not look at these things with regrets. I do have hope. I have experienced this before growing up in the hills of West Virginia, and knowing what hungry and poor, really is. It's not that bad ... And I pray it never is. I do know these hard times are just life lessons that teach us to appreciate the good times that we have had, and that hopefully we will have again. I don't mean to be the "downer" or want sympathy or empathy. But we are the face of the American builder that these lending practices (i.e. ROBBERY) are destroying. The American public can either choose to ignore it and turn away, or fight back.
And if you know me, I am a fighter....
Because these are MY Faces Behind the Story...
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