In an effort to avoid more of the same trouble other lenders are seeing, several of Ireland's largest lenders have announced new requirements and guidelines to for borrowers. In particular, developers and builders are the target.
They will now require that developers and builders have enough cash assets that will total at least half of what they want to borrow. That is a high asking price for many developers especially those first time investors.
For example, Anglo Irish Bank and ACC, who are two of the largest in the country, will require borrowers who are developers to have between 25 per cent and 50 per cent of what they are asking for in cash assets.
With this new move, some developers are feeling the pinch. They may have to sell off landbanks in order to raise enough capital to get approval for new loans.
More so, some developers and builders may be asked to personally guarantee large loans. In recent years, this practice was not often used, especially during the property boom times of recent. Now, developers will be required to take financial responsibility for these loans.
Lenders are doing this simply to protect themselves from the losses other nationally large banks have seen in recent months. Especially in light of the billions of dollars lost by the largest Australian banks, who lost most of their investments in subprime loans, new strict enforcement is likely to be seen.
