Troubled Construction Loans Are Still a Threat to Economy

The trouble for construction loans is far from over.  According to USA Today, the percentage of non-current construction loans was at an all-time high of 17 percent last March.  The Congressional Oversight Panel claims that these loans have the highest likelihood of default and are having the most issues with vacancies and cash-flow. Described as the "riskiest commercial real estate loan product" by Deutsche Bank, construction loans became extremely popular between the first quarters of 2003 and 2008, particularly with small and mid-size banks.  These potentially lucrative loans became extremely easy to get and many in-experienced developers were easily approved.  More than ten percent of assets of banks not ranking in the top 1,000 were construction loans, compared to only two percent of assets of banks in the top ten. Experts predict that construction loans will rebound in time.  Federal regulators encourage banks to work with borrowers and wait out the recession with the hope that eventually an improvement in the overall economy will allow existing borrowers or other parties to pump cash into the troubled loans. For the entire article from USA Today, please click here.