Lender-Liability Suits Rise

The love affair between banks and builders during the housing boom has deteriorated into a series of divorces now spilling into the courts. As lenders rush to curtail their real-estate exposure and preserve sorely needed capital, they are triggering lawsuits from builders that say the banks have unfairly cut off their construction financing, stopped their projects midstream and forced their companies to the brink of bankruptcy. The 222 unit condo-hotel built by Regent Hotel LLC in Stockton, Calif. The company is suing Missouri-based First Bank, saying the bank would not fully fund its construction loan. "Lender-liability lawsuits are coming. It's only just beginning," says Michael Hackard, a lawyer in Sacramento, Calif., who focuses on real-estate law. "There are going to be builders who argue that the lender forced me into... [read full story]