Indy Star: Subdivision Foreclosures
April 08, 2009
The Indianapolis Star has a couple stories today that touch upon commercial foreclosure issues arising out of the demise of residential builders and developers. These cases do not involve loan defaults by homeowners. Rather, they deal with loans to the subdivision developers and the builders secured by the real estate they develop. Here are the links:
As noted, these cases are challenging for all involved and affect many parties and entities. The second link deals with a Gunstra condo development. I know from experience - serving as counsel for a receiver in a similar case - that the developer's default triggers a variety of problems for, not only the developers and the lenders, but the homeowners and even the municipalities.
One of the many difficulties in getting these cases worked out is the considerable lack of demand for new houses or condos, as well as the inability to determine the value (if any) of the ground - the loan collateral. From what I'm hearing, nobody really knows what these subdivisions are worth in today's market, and nobody really knows when the market will turn around. Traditional lenders can't wait indefinitely, and they ultimately must foreclose in order to collect something on their loans.