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Friday, August 24, 2007

Condo Troubles

by Calculated Risk on 8/24/2007 08:06:00 PM

From the WSJ: Condo Troubles Further Squeeze Property Lenders

For the nation's real-estate lenders, the other shoe may be about to drop: condominiums.
So many shoes are dropping, the turmoil will be named Imelda!
Already plagued by rising home-loan defaults and foreclosures among overstretched consumers, major markets across the country -- including parts of Florida, California and Washington, D.C. -- are seeing rising foreclosures and bankruptcies of entire condo projects.
Typically, condo developers are required to pay off construction loans shortly after construction is completed. But with sales stalled, more developers are defaulting, creating headaches for banks and real-estate funds that financed the projects.

Delinquencies on condo-construction loans have already jumped to 4% from 1% over the past year. ...

Underlying the defaults was a loosening of lending standards.
Kudos to WSJ journalist Alex Frangos for not blaming the problems on subprime loans. These "loose" lending standards were pervasive in C&D (construction and development) and CRE (commercial real estate) lending, in addition to residential real estate.