What happens when a bank fails in the middle of your build?

15 years ago

We are finally a month away from breaking ground and the biggest news has continued to be the financial/real estate markets. Of note is the failure of IndyMac Bank (which a lot of people have used for their construction loan). I have gotten a pre-approval for a construction loan through MidCounty and waiting on another loan approval through a local mortgage broker (for comparisons).

My concern is what happens if your bank fails in the middle of your construction project?

Also, I'm a little concerned about the markets - did anyone build through the last economic downturn? Basically, am I taking a big risk building now?

TIA for any advice/reassurances :)

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Comments (4)

Phobie Privett
15 years ago
Longus-we went through IndyMac for construction and closed last Dec. I'm not particularly worried about any economic downturn. I think if you have a steady job with security, don't have lots of debt and didn't overbuild for your budget (and have a reliable contractor), you should be fine. You'll have to pay to live somewhere regardless of the economy, right?

I'm not anticipating any noticeable changes (besides the name) for IndyMac. The government will probably just take everything over and it'll be business as usual. I have many opinions on that, but that's a whole other post.... :)
marthaelena
15 years ago
I can not give you reassurance but maybe someone can give reassurance to both of us.
We are to be our own GC (we have done this before) and we have the plans, bids, we own the lot (paid off), approved building permit. 3 weeks ago my DH told me that he was not sure and the thing is, I felt exactly the same so I started to look for a house already built and I can not find anything. As superchick says, we have to live somewhere (now we are in a small APT, we already sold our house)
Houses are either too expensive (the ones I like), too old, too big or too far. Some of that houses have a record of high utilities and we were building energy efficient.
A week ago DH said, lets build... and today I told him.... I am not sure. I am a person that is usually very possitive but I also have a six sense that works sometimes :)

I want to have a nice home, we deserve that but then I feel sometimes that I better keep down to earth and get a house for half the price of a new one and wait to build the dream home when we retire (in about 6 years)
DH works for the state and I work for a private company
HELP!!!!
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longus
Original Author
15 years ago
thanks Superchick - I have the criterias that you mentioned (other than the reliable contractor as that is to be seen :) - however, since I'll be the GC, I can limit the 'upgrade' items that tend to throw budgets out of whack. We'll definitely try stay within a loan amount that we can afford.

Marthaelena - I've done the exact same thing! somehow after working so much on the house plan layout, nothing existing seems to fit the bill. Also, since our dream is to have some acreage around us - I can't find an existing home with acreage (even foreclosed ones) that we can afford. Waiting is a good option, however, you don't know what will happen in 6 years - construction might pick up and you loose out on a great time to get lots of contractors hungry to work for you.

I guess I'm just trying to justify it to myself as well...:) and why I'm still wide awake at midnight!
krislrob
15 years ago
We have National City and I have heard from other people building locally that the bank has been stopping giving draws in the middle of the project. We pulled off of the garage/guest quarters that we were going to build (which was part of our loan) for several reasons. The bank is happy with that. We didn't finish our house before our year deadline and they are changing the financing on us. Watch THAT!! Instead of the 7ish cap for our jumbo loan, they are offering two products. 2 years interest only or 9 1/4% interest 30 year fixed. One is the road to foreclosure and the other is the road to bankruptcy. We're self-employed with good assets and credit, but the loans have dried up and I talk to numerous people in the same boat. We're in So Cal.
We need our final small draw to pay some contractors and it used to be that the bank would be out in the next day or so. Now, it's been over a week since we put in for the draw and no word....Scary.
We closed our property about 1 year and 3 months ago and were in escrow for 10 months before that. Love the property, love the house, but there are a lot of estate home foreclosures with promise out there that might have worked just fine.....
We may hire an attorney to see if we can negotiate something a little kinder, but the clock is ticking.....

What happens when a bank fails in the middle of your build?

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Phobie Privett

marthaelena

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What happens when a bank fails in the middle of your build?

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Phobie Privett

marthaelena

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