Wall Street Journal (03/21/08) P. A1; Corkery, Michael
The housing slump and mortgage crisis are taking a toll on small home builders, many of which are saddled with unsold inventory and land and are now finding it difficult to make interest payments and keep developments out of foreclosure. Owners of these firms who used recourse debt to pay for construction are at risk of losing homes, cars and other personal assets if they default. Meanwhile, small banks that focused on construction lending because they could not compete with larger lenders in the mortgage arena also are experiencing pain, with Foresight Analytics reporting an increase in single-family construction loan delinquencies to 7.5 percent in the fourth quarter from 2.1 percent during the same period in 2006. Whitlatch & Co., an Ohio builder, is facing bankruptcy; and the company's owner, Bill Whitlatch, already used $2 million of his personal savings to maintain operations. Whitlatch notes he was unable to handle discounts like those offered by the publicly traded builders because his company could not leverage cash and long-term debt tied to operations in other markets.
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