Homebuilding Companies Negotiates Friendly Foreclosure Agreement

Posted on September 12th, 2008 by Samanta Parks

The US housing market downturn has hit the average homeowners hard. Record foreclosure rates have been seen over the summer. Single family homes have been especially hard hit with this recent downturn. Some sections of the nation have seen double digit increases in foreclosures. The housing slump is also hitting builders, as sales slow to the lowest levels in years. In an indication that the housing slump is not limited to homeowners, Comstock Homebuilding Companies, Inc (NASDAQ: CHCI) broadcast that on August 29, 2008 they entered a foreclosure arrangement with Branch Banking and Trust Company (BB&T) on $32.7 million of the company\’s secured debt. Comstock Homes has a total of $144 of secured debt. This agreement covers 22.8% of Comstock Homes total secured debt. Comstock Homes has agreed to fully collaborate with BB&T on specific assets (real estate), and BB&T has agreed to fully release its obligations with no insufficiency liability after the foreclosure. Atlanta and Virginia properties are covered by this contract. Comstock will continue to hold any lots that had been sold. These sold lots were not part of the foreclosure arrangement.

Comstock Homes undertook this drastic step in order to survive what has been characterized as the worst downturn in the housing market in a generation by Comstock executives. Comstock Homes has made prior statements indicating that it will continue to work to restructure its debt, based on the current slow sales of properties and foreclosed homes. Comstock Homes is working with other lenders to secure similar arrangements. This is part of a major debt-restructuring program that Comstock Homes is implementing. The goal of this restructuring program is to meet the challenges in the US housing market. Statements by Comstock Homes executives indicated that they were pleased with the outcome of this negotiated arrangement.

Branch Banking and Trust is expected to complete the foreclosure process on September 2, 2008 on specific lots in Maristone, Wyngate, James Road, and Glen Ivy in Atlanta. By September 30, 2008, Branch Banking and Trust expects that the Virginia foreclosure proceedings will conclude on the Woodlands of Round Hill and Barrington Park.

For the quarter ending June 30, 2008, Comstock stated that prior to this arrangement it had already recorded impairment charges with respect to the Branch Banking and Trust charges. Comstock Homes does not expect any future material write-offs from executing the agreement. All expenses of the foreclosure were captured in the second quarter.

About Comstock Homebuilding Companies, Inc.

Comstock Homebuilding Companies, Inc. is a publicly traded real estate development firm, founded in 1985. The company trades on the NASDAQ under the symbol CHCI. Comstock Homes offers a wide variety of products targeted to the needs of a broad section of home buyers. They currently market real estate in Atlanta, Georgia, Washington, D.C., and Raleigh, North Carolina. It focuses on residential products that are priced to be affordable for sale. Comstock builds active adult communities, mixed-use urban communities, high-rise condominiums, townhouses, mid-rise condominiums, and single-family homes.