Discussion on Ennis Homes

Schumpeter Reincarnate Joined: 24 May 2008 Posts: 220525

http://builder-implode.com/imp.....02-03.html

Dud? Joined: 18 Mar 2009 Posts: 3

Interesting how Ennis homes admits no fault on their part and blames the BK filing entirely on lenders, who are unwilling to lend on overencumbered property. I am not a banker, but usually you have to have equity in a piece of collateral before you can get a loan right? Isn't that Banking 101?
More importantly, the reason they are out of business is because homes are selling for less than replacement cost. Makes no sense for a builder to spend $200k to build a home that will only sell for $180k. Perhaps Mr. Ennis forgot to mention this because he is too busy trying to place the blame on someone else.

Posted: Thu Apr 02, 2009 2:49 pm

In the A&D deals I have been involved with, it was common practice for the bank to require at least 20% from the builder developer. Since Ennis was dealing with a bank that received bailout funds, that bank was one of the big boys and they definitely insisted on some skin in the game. What happened to Ennis is the same thing that happened to all of us – the banks haphazardly withdrew construction lending which forced builders to halt construction in mid-stream. Many homes were left only partially complete and in some cases, not even dried-in. The banks did not look individually at each deal. They took a broad brush approach to the problem caused by poor lending practices and applied it nationwide. Ennis was a victim – a casualty.