SunTrust plays rough with builders in Triangle

Danny Creech took the call last August. It was his bank, SunTrust. He owed the Atlanta lender $1.5 million, but the debt wasn't a worry. Creech, president of Landon Homes in Raleigh, routinely borrowed to buy and build homes. He paid debts when he sold homes and then borrowed again. When homes lingered on the market, getting an extension on the loan typically required only a two-minute call and a $150 fee. But this was no two-minute call. SunTrust wouldn't be extending the loan terms. The bank wanted to be paid back. In 60 days. Such demands are anathema to builders, whose businesses float in the flow of credit. Now Creech, who says he "never missed an interest payment, never been late on one, always lived up to my part of the obligation," is in default, facing foreclosure and fearing his future. Creech is among a growing group of Triangle builders who say SunTrust is getting tough when they are most vulnerable. Although most banks have tightened lending, particularly on construction, many are willing to offer extensions on loans to responsible builders who are paying on time. SunTrust says it is, too. In its annual report, filed Monday with the U.S. Securities and Exchange Commission, the bank noted that while it is monitoring problem loans, it is extending deadlines to borrowers who are still current on payments. But the bank also said it is tightening credit for some customers despite their excellent payment histories. "We are reducing loans to people who we don't believe can pay them back," said Mike McCoy, a SunTrust spokesman in Atlanta. "That's part of being a prudent lender." At least a dozen local builders, investors and lawyers say SunTrust's approach is putting diligent borrowers in danger of default. The push is adding casualties to a bust that has already claimed almost one-fifth of the region's builders. It is leaving communities pocked with red-clay lots and partly built homes. And it's forcing some builders to turn to family members for financial help. What galls the builders most is that SunTrust received $4.9 billion from taxpayers through the Troubled Asset Relief Program, or TARP, which is aimed at loosening frozen credit. Builder scrambles Creech, 49, was the guy banks wanted to lend money to during the housing boom. As profits poured in, he didn't buy a fancy car, just a Ford truck with hand-cranked windows. He hired one employee, his best friend. Together, they sold six homes in a brutal 2008, more than in any other year. When SunTrust called his loans, he had to scramble. He sold two houses at a loss of $105,000. He persuaded smaller lenders to take on portions of the debt. After 60 days, Creech still owed SunTrust about $560,000. The loan officer told him that SunTrust could refinance the balance, but only if he paid $55,000 and agreed to pay a monthly interest rate of 8.5 percent on the balance. "I could get money from the mob for cheaper," Creech said. He pleaded for better terms. Instead he got a note from a lawyer assigned to collect the debt. The bank hasn't foreclosed on Creech yet. Bigger builders also face pressure to clear their SunTrust loans. In November, MacGregor Development, the company behind such Cary neighborhoods as MacGregor Downs, sought bankruptcy protection after it could not cover a $4.7 million debt to SunTrust. And in December, SunTrust pushed a 934-acre golf community called Hasentree into foreclosure, jeopardizing the future of an established Raleigh developer, Creedmoor Partners. Other lenders accused SunTrust isn't the only lender accused of squeezing customers in this brutal economy. Last month Granite Development accused Wachovia Bank of "predatory banking activities and unfair and deceptive trade practices" in a Guilford County lawsuit that details its fractured friendship with the Charlotte lender.