Some smaller regional banks that have millions in builder/development loans out have come up with a unique strategy to avoid taking back half developed dirt, partially done condo conversions, and plats that just aren't moving. Check out an example of one of the programs being offered to buyers:
5/1 ARM, 10 year interest only, 5.5%. ZERO down, NO MI, closing costs of 1.5% (prepaids and loan fees). Formerly called "Loan only available to God."
Essentially what they are doing is trading builder loans that they aren't getting paid on for residential mortgages that they will at least get partially paid on. They portfolio the loans until the market rebounds (hopefully).
The alternative for the bank is to take the properties (in various states of completion) back onto their books en mass and this will totally screw up their capitalization requirements, and write downs will explode.
For me, a lender who is competing against them, this sucks. However, in view of the big picture, this is a good thing for builders, banks and potentially for buyers as long as they don't overpay for the home.
What bank gimmicks / strategies have you been seeing in your area?