Residential Builder Finance Company
Industry:Banking & Finance
Service:Financial Advisor to Lender
Company:A large Midwest-based residential builder finance company that had been in business over 10 years supporting mainly small to mid-sized developers.
As the market turned, the Company was unable to collect from their customers as many of them went out of business. Further compounding the issue was the fact that the lender did not limit the amount of lot inventory in their borrowing base and a number of the developments were less than half completed.
The Finance company asked a Focus Professional to quickly assess their position and exposure and what the best approach to remediation was.
By the end of the first week the Lender was given a report outlining their exposure by developer, by phase of completion on each unit, by proximity to metro areas and by zip code with recent value trend information. The Lender was also given a remediation plan which broke the exposure into major categories with remediation strategies based on phase of completion and whether it made economic sense to complete any partially finished homes. This also called for a consensual workout with the underlying developers.
As a result of implementing the key points of the plan the lender was able to orchestrate a much improved recovery that would be executed over time minimizing the immediate losses incurred by the institution and maximizing their long term recovery. Furthermore, the lender was able to avoid a fair amount of litigation saving the institution significant expense.